Economics at your fingertips  

On the hysteresis of financial crises in the US: Evidence from S&P 500

Sónia R. Bentes

Physica A: Statistical Mechanics and its Applications, 2021, vol. 565, issue C

Abstract: This paper examines the financial crisis durations in the US. Based on S&P 500 returns we investigate whether these crises exhibit long-memory or are merely transitional. To this end, we rely on continuous survival time models to gauge the hazard of ending a spell of contiguous return declines and test several specifications under the proportional hazards and the accelerated failure time assumptions. Our findings suggest that the log-normal accelerated failure time is the best model to describe the data, thus yielding a non-monotonic hazard that increases up to a maximum and, then decreases. We also found that spell lengths increase during recessions, when interest rates and prices are more volatile. Our main conclusion is that short spells of negative returns are mainly frictional, while long spells turn into structural crises that may trigger hysteresis.

Keywords: Hysteresis; Duration dependence; Negative returns; Survival models; Hazard rate (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.physa.2020.125583

Access Statistics for this article

Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis

More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2021-06-30
Handle: RePEc:eee:phsmap:v:565:y:2021:i:c:s0378437120308815