Do Stock Returns Rebound After Bear Markets? An Empirical Analysis From Five OECD Countries
Frédérique Bec and
Songlin Zeng ()
No 2013-21, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise
This paper proposes an empirical study of the shape of recoveries in - nancial markets from a bounce-back augmented Markov Switching model. It relies on models rst applied by Kim, Morley and Piger  to the busi- ness cycle analysis. These models are estimated for monthly stock market returns data of ve developed countries for the post-1970 period. Focus- ing on a potential bounce-back e ect in nancial markets, its presence and shape are formally tested. Our results show that i) the bounce-back e ect is statistically signi cant and large in all countries, but Germany where evi- dence is less clear-cut and ii) the negative permanent impact of bear markets on the stock price index is notably reduced when the rebound is explicitly taken into account.
Keywords: Stock Market Returns; Markov Switching Models; Shape of Bounce- Back (search for similar items in EconPapers)
JEL-codes: C22 G10 (search for similar items in EconPapers)
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Journal Article: Do stock returns rebound after bear markets? An empirical analysis from five OECD countries (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ema:worpap:2013-21
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