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Anger, sadness and bear markets

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  • Robert Durand
  • Marta Simon
  • Alex Szimayer

Abstract

Can an understanding of mood help us understand aspects of systematic risk, volume and portfolios' exposure to systematic risk during bear-market regimes? We hypothesize that bear markets are associated with negative emotions: either a low-arousal negative state (e.g. sadness and depression) or a high-arousal negative state (e.g. anger and stress). We define a bear market as a stock market regime where the average return is statistically significantly lower than zero and find evidence that the bear market of November 1987 to February 1988 behaved as if it was associated with a pervasive low-arousal negative state amongst investors.

Suggested Citation

  • Robert Durand & Marta Simon & Alex Szimayer, 2009. "Anger, sadness and bear markets," Applied Financial Economics, Taylor & Francis Journals, vol. 19(5), pages 357-369.
    • Handle: RePEc:taf:apfiec:v:19:y:2009:i:5:p:357-369
    DOI: 10.1080/09603100801964362
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    References listed on IDEAS

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    1. William N. Goetzmann & Ning Zhu, 2005. "Rain or Shine: Where is the Weather Effect?," European Financial Management, European Financial Management Association, vol. 11(5), pages 559-578, November.
    2. George Woodward & Heather Anderson, 2009. "Does beta react to market conditions? Estimates of 'bull' and 'bear' betas using a nonlinear market model with an endogenous threshold parameter," Quantitative Finance, Taylor & Francis Journals, vol. 9(8), pages 913-924.
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    Cited by:

    1. Lim, Dominic & Durand, Robert B. & Yang, Joey Wenling, 2014. "The microstructure of fear, the Fama–French factors and the global financial crisis of 2007 and 2008," Global Finance Journal, Elsevier, vol. 25(3), pages 169-180.
    2. Júlio Lobão & Luís Pacheco & Luís Alves, 2019. "Price Clustering in Bank Stocks During the Global Financial Crisis," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 66(4), pages 465-486, December.

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