IDEAS home Printed from https://ideas.repec.org/p/gmf/wpaper/2011-17.html
   My bibliography  Save this paper

The Portuguese Stock Market Cycle: Chronology and Duration Dependence

Author

Listed:
  • Vitor Castro

    (University of Coimbra and NIPE)

Abstract

This paper tries to identify, for the first time, a chronology for the Portuguese stock market cycle and test for the presence of duration dependence in bull and bear markets. A duration dependent Markov-switching model is estimated over monthly growth rates of the Portuguese Stock Index for the period 1989-2010. Six episodes of bull/bear markets are identified during that period, as well as the presence of positive duration dependence in bear but not in bull markets.

Suggested Citation

  • Vitor Castro, 2011. "The Portuguese Stock Market Cycle: Chronology and Duration Dependence," GEMF Working Papers 2011-17, GEMF, Faculty of Economics, University of Coimbra.
    • Handle: RePEc:gmf:wpaper:2011-17
    as

    Download full text from publisher

    File URL: https://repec.uc.pt/gmf/wpaper/wpgemf/gemf_2011-17.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Vitor Castro, 2015. "The Portuguese business cycle: chronology and duration dependence," Empirical Economics, Springer, vol. 49(1), pages 325-342, August.
    2. Castro, Vítor, 2010. "The duration of economic expansions and recessions: More than duration dependence," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 347-365, March.
    3. António Afonso & Peter Claeys & Ricardo Sousa, 2011. "Fiscal regime shifts in Portugal," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 10(2), pages 83-108, August.
    4. Shyh-Wei Chen & Chung-Hua Shen, 2007. "Evidence of the duration-dependence from the stock markets in the Pacific Rim economies," Applied Economics, Taylor & Francis Journals, vol. 39(11), pages 1461-1474.
    5. Ozun, Alper & Turk, Mehmet, 2009. "A Duration-Dependent Regime Switching Model for an Open Emerging Economy," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 66-81, December.
    6. Mike Artis & Hans-Martin Krolzig & Juan Toro, 2004. "The European business cycle," Oxford Economic Papers, Oxford University Press, vol. 56(1), pages 1-44, January.
    7. Lunde A. & Timmermann A., 2004. "Duration Dependence in Stock Prices: An Analysis of Bull and Bear Markets," Journal of Business & Economic Statistics, American Statistical Association, vol. 22, pages 253-273, July.
    8. Terence Tai-Leung Chong & Zimu Li & Haiqiang Chen & Melvin Hinich, 2010. "An investigation of duration dependence in the American stock market cycle," Journal of Applied Statistics, Taylor & Francis Journals, vol. 37(8), pages 1407-1416.
    9. Maheu, John M & McCurdy, Thomas H, 2000. "Identifying Bull and Bear Markets in Stock Returns," Journal of Business & Economic Statistics, American Statistical Association, vol. 18(1), pages 100-112, January.
    10. Beate Schirwitz, 2009. "A comprehensive German business cycle chronology," Empirical Economics, Springer, vol. 37(2), pages 287-301, October.
    11. Sichel, Daniel E, 1991. "Business Cycle Duration Dependence: A Parametric Approach," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 254-260, May.
    12. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-384, March.
    13. Chauvet, Marcelle & Potter, Simon, 2000. "Coincident and leading indicators of the stock market," Journal of Empirical Finance, Elsevier, vol. 7(1), pages 87-111, May.
    14. Harman, Yvette S. & Zuehlke, Thomas W., 2007. "Nonlinear duration dependence in stock market cycles," Review of Financial Economics, Elsevier, vol. 16(4), pages 350-362.
    15. Durland, J Michael & McCurdy, Thomas H, 1994. "Duration-Dependent Transitions in a Markov Model of U.S. GNP Growth," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 279-288, July.
    16. Adrian R. Pagan & Kirill A. Sossounov, 2003. "A simple framework for analysing bull and bear markets," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 23-46.
    17. Shyh-Wei Chen & Chung-Hua Shen, 2006. "Is there a duration dependence in Taiwan's business cycles?," International Economic Journal, Taylor & Francis Journals, vol. 20(1), pages 109-128.
    18. Zuehlke, Thomas W, 2003. "Business Cycle Duration Dependence Reconsidered," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(4), pages 564-569, October.
    19. James H. Stock & Mark W. Watson, 1993. "Business Cycles, Indicators, and Forecasting," NBER Books, National Bureau of Economic Research, Inc, number stoc93-1.
    20. Francis X. Diebold & Glenn Rudebusch & Daniel Sichel, 1993. "Further Evidence on Business-Cycle Duration Dependence," NBER Chapters, in: Business Cycles, Indicators, and Forecasting, pages 255-284, National Bureau of Economic Research, Inc.
    21. Stock, James H. & Watson, Mark W. (ed.), 1993. "Business Cycles, Indicators, and Forecasting," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226774886, September.
    22. Chang-Jin Kim & Charles R. Nelson, 1998. "Business Cycle Turning Points, A New Coincident Index, And Tests Of Duration Dependence Based On A Dynamic Factor Model With Regime Switching," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 188-201, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Fernando Henrique De Paula E Silva Mendes & Guilherme Valle Mour, 2014. "Evidências De Bull E Bear Market No Índice Bovespa: Uma Aplicação De Modelos De Regime Markoviano E Duration Dependence," Anais do XLI Encontro Nacional de Economia [Proceedings of the 41st Brazilian Economics Meeting] 138, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Vitor Castro, 2015. "The Portuguese business cycle: chronology and duration dependence," Empirical Economics, Springer, vol. 49(1), pages 325-342, August.
    2. Iiboshi, Hirokuni, 2007. "Duration dependence of the business cycle in Japan: A Bayesian analysis of extended Markov switching model," Japan and the World Economy, Elsevier, vol. 19(1), pages 86-111, January.
    3. Castro, Vítor, 2010. "The duration of economic expansions and recessions: More than duration dependence," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 347-365, March.
    4. Vitor Castro, 2013. "The duration of business cycle expansions and contractions: are there change-points in duration dependence?," Empirical Economics, Springer, vol. 44(2), pages 511-544, April.
    5. Fernando H.P.S Mendes & João Frois Caldeira & Guilherme Valle Moura, 2019. "Duration-dependent Markov-switching model: an empirical study for the Brazilian business cycle," Economics Bulletin, AccessEcon, vol. 39(1), pages 676-685.
    6. Rose Cunningham & Ilan Kolet, 2007. "Housing Market Cycles and Duration Dependence in the United States and Canada," Staff Working Papers 07-2, Bank of Canada.
    7. Lunde A. & Timmermann A., 2004. "Duration Dependence in Stock Prices: An Analysis of Bull and Bear Markets," Journal of Business & Economic Statistics, American Statistical Association, vol. 22, pages 253-273, July.
    8. Shyh-Wei Chen & Chung-Hua Shen, 2007. "Evidence of the duration-dependence from the stock markets in the Pacific Rim economies," Applied Economics, Taylor & Francis Journals, vol. 39(11), pages 1461-1474.
    9. Jensen, Mark J. & Liu, Ming, 2006. "Do long swings in the business cycle lead to strong persistence in output?," Journal of Monetary Economics, Elsevier, vol. 53(3), pages 597-611, April.
    10. Magnus Reif, 2020. "Macroeconomics, Nonlinearities, and the Business Cycle," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 87.
    11. João Cruz & João Nicolau & Paulo M. M. Rodrigues, 2021. "Structural Changes in the Duration of Bull Markets and Business Cycle Dynamics," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 28(3), pages 333-352, September.
    12. Stijn Claessens & M. Ayhan Kose & Marco E. Terrones, 2011. "Financial Cycles: What? How? When?," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 7(1), pages 303-344.
    13. Francis X. Diebold & Glenn D. Rudebusch, 2001. "Five questions about business cycles," Economic Review, Federal Reserve Bank of San Francisco, pages 1-15.
    14. John M Maheu & Thomas H McCurdy & Yong Song, 2009. "Extracting bull and bear markets from stock returns," Working Papers tecipa-369, University of Toronto, Department of Economics.
    15. Rodriguez Gabriel, 2007. "Application of Three Alternative Approaches to Identify Business Cycles in Peru," Working Papers 2007-007, Banco Central de Reserva del Perú.
    16. Chang-Jin Kim & Chris Murray, 1999. "Permanent and Transitory Nature of Recessions," Discussion Papers in Economics at the University of Washington 0041, Department of Economics at the University of Washington.
    17. Juan Reboredo, 2010. "Nonlinear effects of oil shocks on stock returns: a Markov-switching approach," Applied Economics, Taylor & Francis Journals, vol. 42(29), pages 3735-3744.
    18. Hans-Martin Krolzig, 2000. "Predicting Markov-Switching Vector Autoregressive Processes," Economics Series Working Papers 2000-W31, University of Oxford, Department of Economics.
    19. George Koutsoumanis & Vítor Castro, 2023. "The duration of acceleration cycle downturns: duration dependence, international dynamics and synchronisation," Empirical Economics, Springer, vol. 64(4), pages 1667-1698, April.
    20. Congressional Budget Office, 2022. "A Markov-Switching Model of the Unemployment Rate: Working Paper 2022-05," Working Papers 57582, Congressional Budget Office.

    More about this item

    Keywords

    stock market cycles; bull and bear markets; duration dependence; Markov-switching.;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G19 - Financial Economics - - General Financial Markets - - - Other
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gmf:wpaper:2011-17. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sofia Antunes (email available below). General contact details of provider: https://edirc.repec.org/data/cebucpt.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.