Bull and bear markets during the COVID-19 pandemic

John Maheu, Thomas McCurdy and Yong Song

Finance Research Letters, 2021, vol. 42, issue C

Abstract: The COVID-19 pandemic has caused severe disruption worldwide. We analyze the aggregate U.S. stock market during this period, including implications for both short and long-horizon investors. We identify bull and bear market regimes including their bull correction and bear rally components, demonstrate our model’s performance in capturing periods of significant regime change, and provide weekly forecasts that improve risk management and investment decisions. An investment strategy that uses out-of-sample forecasts for market states outperforms a buy and hold strategy during the pandemic by a wide margin, both in terms of annualized returns and Sharpe ratios.

Keywords: COVID-19; Equity returns; Markov switching; Predictive density; Investment strategies (search for similar items in EconPapers)
JEL-codes: C32 C58 G1 G11 G17 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Working Paper: Bull and Bear Markets During the COVID-19 Pandemic (2020)
Working Paper: Bull and Bear Markets During the COVID-19 Pandemic (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:42:y:2021:i:c:s1544612321001720

DOI: 10.1016/j.frl.2021.102091

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