Defining and Dating Bull and Bear Markets: Two Centuries of Evidence

36 Pages Posted: 1 Jul 2015

See all articles by Liliana Gonzalez

Liliana Gonzalez

ESSEC Business School - Finance Department

Philip Hoang

Australian National University (ANU)

John G. Powell

Massey University - Department of Finance Banking and Property

Shi Jing

Jiangxi University of Finance and Economics

Date Written: June 30, 2015

Abstract

Despite widespread media interest in bull and bear markets, academic research that seeks to formally define bull markets is almost non-existent. This paper defines bull and bear markets in relation to a simple model of mean return regimes, and implements the definition using two formal turning point detection methods to demonstrate that two centuries of stock index returns can be separated into economically and statistically significant bull and bear market states. In-sample analysis of the turning points identified by the detection procedures is consistent with a two-state mean return model, a result that has important implications for capital asset pricing theory.

Keywords: stock market; bulls and bears; turning point dating

JEL Classification: E32; G12; E44; C22

Suggested Citation

Gonzalez, Liliana and Hoang, Philip and Powell, John G. and Jing, Shi, Defining and Dating Bull and Bear Markets: Two Centuries of Evidence (June 30, 2015). Multinational Finance Journal, Vol. 10, No. 1/2, p. 81-116, 2006, Available at SSRN: https://ssrn.com/abstract=2625037

Liliana Gonzalez (Contact Author)

ESSEC Business School - Finance Department ( email )

Avenue Bernard Hirsch
BP 105 Cergy Cedex, 95021
France

Philip Hoang

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

John G. Powell

Massey University - Department of Finance Banking and Property ( email )

Private Bag 11 222
Massey University
Palmerston North, 4442
New Zealand

Shi Jing

Jiangxi University of Finance and Economics ( email )

South Lushan Road
Nanchang, Jiangxi 330013
China

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