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A New Indicator for Describing Bull and Bear Markets

Author

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  • German Forero-Laverde

    (PhDc in Economic History at Universitat de Barcelona)

Abstract

We present new short, medium, and long-run indicators to date and characterise expansions and contractions in financial and economic time series. These Bull-Bear Indicators (BBIs) measure the risk-adjusted excess return with respect to average, to different time horizons, expressed in standard deviations. We illustrate the benefits of this measure by describing the boom-bust cycle in the UK stock market between 1922 and 2015. We compare our results with those obtained from frequently used methodologies in the literature and find that our measures contain substantially more information than the usual binary sequences that describe expansions and contractions and allow for a more granular and nuanced description of time series.

Suggested Citation

  • German Forero-Laverde, 2018. "A New Indicator for Describing Bull and Bear Markets," Working Papers 0129, European Historical Economics Society (EHES).
    • Handle: RePEc:hes:wpaper:0129
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    File URL: https://www.ehes.org/wp/EHES_129.pdf
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    References listed on IDEAS

    as
    1. Adrian Pagan & Don Harding, 2005. "A suggested framework for classifying the modes of cycle research," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 151-159.
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    3. Atack,Jeremy & Neal,Larry (ed.), 2009. "The Origins and Development of Financial Markets and Institutions," Cambridge Books, Cambridge University Press, number 9780521895170, November.
    4. Lawrence J. Christiano & Terry J. Fitzgerald, 2003. "The Band Pass Filter," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 435-465, May.
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    More about this item

    Keywords

    Boom-bust cycle; Bull and bear markets; Stock market; Time series analysis; Severity measures; Dating rules;
    All these keywords.

    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G01 - Financial Economics - - General - - - Financial Crises
    • G1 - Financial Economics - - General Financial Markets
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

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