Identifying regime shifts in Indian stock market: A Markov switching approach

Wasim Ahmad and Kamaiah Bandi

MPRA Paper from University Library of Munich, Germany

Abstract: Seeking for the existence of bull and bear regimes in the Indian stock market, a two state Markov switching autoregressive model (MS (2)-AR (2)) is used to identify bull and bear market regimes. The model predicts that Indian stock market will remain under bull regime with very high probability compared to bear regime. The results also identify the bear phases during all major global economic crises including recent US sub-prime (2008) and European debt crisis (2010). The paper concludes that the Indian stock market is more sensitive to external shocks implying that there is ample scope of policy interventions.

Keywords: Markov switching model; Stock returns; Regime shifts (search for similar items in EconPapers)
JEL-codes: C32 C51 (search for similar items in EconPapers)
Date: 2011-01-11, Revised 2012-03-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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