Structural Changes in the Duration of Bull Markets and Business Cycle Dynamics

This paper tests for structural changes in the duration of bull regimes in 18 developed and emerging economies’ adjusted market capitalization stock indexes, by using the novel approach of Nicolau (Econ Lett 146:64–67, 2016) as well as two additional new procedures introduced here; and investigates...

Full description

Saved in:
Bibliographic Details
Published in:Asia-Pacific financial markets 2021-09, Vol.28 (3), p.333-352
Main Authors: Cruz, João, Nicolau, João, Rodrigues, Paulo M. M.
Format: Article
Language:English
Subjects:
Bull markets
Business cycles
Developing countries
Econometrics
Economic crisis
Economic Theory/Quantitative Economics/Mathematical Methods
Economics
Economics and Finance
Finance
International Economics
LDCs
Macroeconomics/Monetary Economics//Financial Economics
Original Research
Recessions
Securities markets
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:This paper tests for structural changes in the duration of bull regimes in 18 developed and emerging economies’ adjusted market capitalization stock indexes, by using the novel approach of Nicolau (Econ Lett 146:64–67, 2016) as well as two additional new procedures introduced here; and investigates whether the structural changes detected in the bull markets’ duration are connected to the business cycle. We conclude that changes in the duration of bull market regimes seem to precede periods of economic recession. The results provide statistically significant evidence that decreases in bull markets’ duration do not occur independently from economic crises, as 13 out of the 18 markets considered in our sample verify such decreases at least 12 months prior to the occurrence of an economic crisis. Additionally, these structural changes seem to affect smaller companies first, and then the larger ones. The association between decreases in the bull market regimes’ duration and economic crises is possibly a consequence of financial markets’ leading behavior over the economy. These structural changes may serve as proxies for decreasing confidence in financial markets, which naturally affects economic stability.
ISSN:1387-2834
1573-6946
DOI:10.1007/s10690-020-09324-2