Demarcating stable and turbulent regimes in Taiwan's stock market

Yu-Lieh Huang and Chia-Wen Ho ()
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Chia-Wen Ho: University of North Carolina at Charlotte

Economics Bulletin, 2008, vol. 3, issue 35, 1-11

Abstract: Various trading rules involving derivatives have been widely applied by practitioners under a wide range of market conditions to date, however, few econometric models can provide a way to accurately decide when to apply those strategies. In this paper, we employ the Innovation Regime-Switching (IRS) model (Kuan, et al, 2005, JBES) to separate stock price sample periods into stable and turbulent regimes on the basis of their dynamic behaviors. Our results show that, based on regime identification, we can obtain satisfactory profits by implementing appropriate and timely derivative strategies.

Keywords: Bear; market (search for similar items in EconPapers)
JEL-codes: C1 G1 (search for similar items in EconPapers)
Date: 2008-06-11
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