Identifying Bull and Bear Periods in Iran’s Stock Market Using a Non-parametric Approach

Document Type : Research Paper

Authors

1 Assistant Prof. in Financial, Faculty of Management and Accounting, Farabi Campus, University of Tehran, Iran

2 PhD Candidate in Financial, Faculty of Management and Accounting, Farabi Campus, University of Tehran, Iran

Abstract

In this paper, we used Iranian stock market data (TEPIX) to identify the bull and bear phases and to analyze their characteristics during the period of 1991-2017 using a non-parametric approach. Having determined bull and bear phases, we calculated the following five indices (durations, amplitudes, cumulative movements, excess movements and ratio of big expansions and contractions) using a non-parametric approach. The results showed that there are some common facts about the cycles that average duration and amplitudes of the bull market are longer than that of the bear market which are also true in Iran Stock Market. However, the excess index of the bull market is not larger than that of the bear market in Iran. We also found that bull phases are longer and more intense (larger amplitude) than bear phases and the rate of the growth index in the bull periods is higher than the rate of its slowdown in bear periods.
 

Keywords

Main Subjects

References

References
Bakihaskoei, M. & Khajvand, F. (2014). Forecasting the volatility of the oil futures markets using GARCH models and Markov – Switching GARCH models. Journal of Financial Knowledge of Securities Analysis, 7(23), 85-108. (in Persian)
Bejoui, A. & Karaa, A. (2016). Revisiting the bull and bear markets notions in the Tunisian stock market: new evidence from multi-state duration-dependance Markov-Switching models. Economic Modelling, 59, 529-545.
Biscarri, J.G. & Garcia, F.P. (2003). Stock market cycles and stock market development in Spain. Spanish economic review, 6(2), 127-151.
Borio, C. (2012). The financial cycle and macroeconomics: What have we learnt? Bank for international settlements. BIS working paper, 395.
Bry, G. & Boschan, C. (1971). Cyclical analysis of Time Series: Selected Procedures and Computer Program. NBER: NewYork.
Chi, W., Brooks, R., Bissoondoyal-Bheenick, E. & Tang, X. (2016). Classifying Chinese bull and bear markets: indices and individual stocks. Studies in economics and Finance, 33(4), 509-531.
Chuanlei, S. (2012). Essays on the U.S. housing Market and Credit Market. Doctoral dissertation in economics, University of California.
Claessens, S., Kose, M.A. & Terrones, M.E. (2012). How do business and financial cycles interact? Journal of International Economics, 87(1), 178-190.
Cunado, J., Gil-Alana, L.A. & Perez de Gracia, F. (2008). Stock market volatility in US bull and bear markets. J. Money Invest. Bank. (Issue 1).
Edward, S., Biscarri, J.G & Garcia, F.P. (2003). Stock market cycles, financial liberalization and volatility. Working paper 9817, NBER.
Einian, M. & Barkchian, S.M. (2015). Recognizing and dating of business cycle of Iran’s economy. Journal of Monetary and Banking Research, 7(20), 161-194. (in Persian)
Gonzalez, L., Powell, J.G., Shi, J. & Wilson, A. (2007). Two centuries of bull and bear market cycles. International Review of Economic and Finance, 14(4), 469-486.
Gunay, S. (2014). Are the scaling properties of bull and bear markets identical? Evidence from oil and gold markets. International Journal of Financial Studies, 2(4), 315 – 334.
Hamilton, J.D. (1989). A new approach to the economic analysis of non-stationary time series and business cycle. Econometrica, 57: 357-384.
Hanna, A. (2018). A top-down approach to identifying bull and bear market states. International Review of Financial Analysis, 55 (1), 93-110.
Harding, D. & Pagan, A. (2002). Dissecting the cycle. Melbourne Institute, Working paper, No.13/99.
Harding, D. & Pagan, A. (2006). Synchronization of cycles. Journal of econometrics, 132(1), 59-79.
King, R.G. & Plosser, C. (1994). Real Business cycles and test of the Adelmans. Journal of Monetary Economics, 33 (2), 405-438.
Kole, E. & Van Dijk, D. (2016). How to identify and forecast bull and bear markets? Journal of Applied Econometrics, 32(1), 120–139.
Leung, K.P.B. (2006). The duration of bull and bear markets in the Dow Jones Industrial Average. Doctoral thesis, University of Calgary, April2006.
Lunde, A. &Timmermann, A. (2004). Duration dependence in stock prices. Journal of Business & Economic Statistics, 22(3), 253-273.
Mehrani, S., Kamyabi, Y. & Ghayor, F. The effect of capital market cycle on the behavior of predictive models of financial distress. Journal of accounting knowledge, 6(23), 147-171.
Olbrys, J. & Majewska, E. (2014). Direct Identification of Crisis Period on the CEE Stock Markets: The Ifluence of the 2007 U.S. Subprime Crisis. Procedia Economic and Finance, 14, 461-470.
Pagan, A. & Sossounov, K.A. (2004). A simple framework for analyzing bull and bear markets”. Journal of applied econometrics, 18(1), 23-46.
Pandey, R., Patnaik, I. & Shah, A. (2017). Dating business cycles in India. Indian Growth and development Review, 10(1), 1-44.
Raei, R., Mohammadi, Sh. & Saranj, A. (2014). The dynamics of Tehran Stock Exchange using the Switching Markov –GARCH in mean. Journal of Financial Research, 16(1), 77-98. (in Persian)
Watson, M. (1994). Business cycle durations and postwar stabilization of the U.S. economy. American Economic Review, 84, 24-46.
Yosefzadeh, N. & Azami, Z. (2015). Investigating the Impact of Working Capital Management on Company Profitability in Different Business Cycles. Journal of Accounting Knowledge, 6(23), 147-171.
(in Persian)
Zeng, S. & Bec, F. (2016). Do stock returns rebound after bear markets? An empirical analysis from five OECD countries. Journal of empirical finance, 30, 50-61.
 
 
Financial Research Journal
Volume 19, Issue 4
2017
Pages 535-556

Files

Share

How to cite

Statistics