Duration Dependence in Stock Prices: An Analysis of Bull and Bear Markets

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This article studies time series dependence in the direction of stock prices by modeling the (instantaneous) probability that a bull or bear market terminates as a function of its age and a set of underlying state variables, such as interest rates. A random walk model is rejected both for bull and bear markets. Although it . ts the data better, a generalized autoregressive conditional heteroscedasticity model is also found to be inconsistent with the very long bull markets observed in the data. The strongest effect of increasing interest rates is found to be a lower bear market hazard rate and hence a higher likelihood of continued declines in stock prices.


Udgivelsesdato: JUL
OriginalsprogEngelsk
TidsskriftJournal of Business and Economic Statistics
Vol/bind22
Nummer3
Sider (fra-til)253-273
Antal sider21
ISSN0735-0015
DOI
StatusUdgivet - 2004

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