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Has the structural break slowed down growth rates of stock markets?


  • Narayan, Paresh Kumar


In this paper, we use the common structural break test suggested by Bai et al. (1998) to test for a common structural break in the stock prices of the US, the UK, and Japan. On the basis of the structural break, we divide each country's stock price series into sub-samples and investigate whether or not the structural break had slowed down the growth of stock markets. Our main findings are that when stock markets are modelled in a trivariate sense the common structural break turns out to be 1990:02, with the confidence interval including several episodes, such as the asset price bubble when housing prices and stock prices in Japan reached a peak in 1988/1989, the early 1990s recession in the UK, the business cycle peak of July 1990, the August 1990 Iraqi invasion of Kuwait and the March 1991 business cycle trough. Annual average growth rates suggest that the structural break has slowed down the growth rate of the US, the UK and Japanese stock markets.
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  • Narayan, Paresh Kumar, 2009. "Has the structural break slowed down growth rates of stock markets?," Economics Series eco_2009_07, Deakin University, Faculty of Business and Law, School of Accounting, Economics and Finance.
  • Handle: RePEc:dkn:econwp:eco_2009_07

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    References listed on IDEAS

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    Cited by:

    1. Narayan, Paresh Kumar & Liu, Ruipeng & Westerlund, Joakim, 2016. "A GARCH model for testing market efficiency," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 41(C), pages 121-138.
    2. Zhang, Yue-Jun & Yao, Ting, 2016. "Interpreting the movement of oil prices: Driven by fundamentals or bubbles?," Economic Modelling, Elsevier, vol. 55(C), pages 226-240.
    3. García-Cintado, Alejandro & Romero-Ávila, Diego & Usabiaga, Carlos, 2015. "Can the hysteresis hypothesis in Spanish regional unemployment be beaten? New evidence from unit root tests with breaks," Economic Modelling, Elsevier, vol. 47(C), pages 244-252.

    More about this item


    Common Structual Break Test; Stock Markets;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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