Do stock returns rebound after bear markets? An empirical analysis from five OECD countries

Songlin Zeng and Frédérique Bec

Journal of Empirical Finance, 2015, vol. 30, issue C, 50-61

Abstract: This paper proposes an empirical study of the shape of recoveries in financial markets from a bounce-back augmented Markov Switching model. This model is estimated for monthly stock market returns data of five developed countries for the post-1970 period. The presence and shape of the bounce-back effect are formally tested. Our results show that i) the bounce-back effect is statistically significant and large in all countries, but it is less evident in Germany; and ii) the negative permanent impact of bear markets on the stock price index is notably reduced when the rebound is explicitly taken into account.

Keywords: Stock market returns; Markov Switching models; Shape of bounce-back (search for similar items in EconPapers)
JEL-codes: C22 G10 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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Working Paper: Do Stock Returns Rebound After Bear Markets? An Empirical Analysis From Five OECD Countries (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:30:y:2015:i:c:p:50-61

DOI: 10.1016/j.jempfin.2014.11.005

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