Bull and Bear Markets During the COVID-19 Pandemic

John Maheu, Thomas McCurdy and Yong Song

MPRA Paper from University Library of Munich, Germany

Abstract: The COVID-19 pandemic has caused severe disruption to economic and financial activity worldwide. We assess what happened to the aggregate U.S. stock market during this period, including implications for both short and long-horizon investors. Using the model of Maheu, McCurdy and Song (2012), we provide smoothed estimates and out-of-sample forecasts associated with stock market dynamics during the pandemic. We identify bull and bear market regimes including their bull correction and bear rally components, demonstrate the model's performance in capturing periods of significant regime change, and provide forecasts that improve risk management and investment decisions. The paper concludes with out-of-sample forecasts of market states one year ahead.

Keywords: predictive density; long-horizon returns; Markov switching (search for similar items in EconPapers)
JEL-codes: C1 C11 C22 G1 G11 G17 (search for similar items in EconPapers)
Date: 2020-11
New Economics Papers: this item is included in nep-fmk, nep-ore and nep-rmg
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https://mpra.ub.uni-muenchen.de/104504/1/MPRA_paper_104504.pdf original version (application/pdf)

Related works:
Journal Article: Bull and bear markets during the COVID-19 pandemic (2021)
Working Paper: Bull and Bear Markets During the COVID-19 Pandemic (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:104504

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