Bear, Bull, Sidewalk, and Crash: The Evolution of the US Stock Market Using Over a Century of Daily Data

Shixuan Wang, Rangan Gupta and Yue-Jun Zhang ()

No 202097, Working Papers from University of Pretoria, Department of Economics

Abstract: In this paper, we employ a four-state hidden semi-Markov model (HSMM), which outperforms a hidden Markov model (HMM), to identify market conditions of the Dow Jones Industrial stock market over the daily period of 16th of February, 1885 to 4th of June, 2020. Our results indicate that the four hidden states represent bear-, bull-, sidewalk-, and crash-markets, which in turn appropriately captures the various major historical events during the period of study. Our results have implications for investors and policymakers.

Keywords: Dow Jones Industrial Average; Stock Returns; Hidden (semi-)Markov Models (search for similar items in EconPapers)
JEL-codes: C22 G10 (search for similar items in EconPapers)
Pages: 9 pages
Date: 2020-10
New Economics Papers: this item is included in nep-fmk, nep-his, nep-ore and nep-rmg
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Journal Article: Bear, Bull, Sidewalk, and Crash: The Evolution of the US Stock Market Using Over a Century of Daily Data (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:pre:wpaper:202097

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