A top-down approach to identifying bull and bear market states

Alan Hanna

Abstract

Bull and bear markets receive considerable media and academic attention. It is widely believed that such states are important determinants of wider market dynamics, yet no agreed definition exists. This paper investigates frameworks for ex post classification of asset prices in two-state (bull and bear) markets.
An emphasis is placed on identifying state transition points that might achieve consensus. A number of potential difficulties with existing methodologies are highlighted. A principle-based approach is adopted from which a new, flexible, hierarchical methodology is proposed that addresses these issues and permits varying degrees of resolution allowing secondary trends such as bear rallies to be incorporated. The methodology is shown to be optimal under one measure of performance.

Original language	English
Publication status	Published - 10 Dec 2016
Event	10th International Conference on Computational and Financial Econometrics - Higher Technical School of Engineering, University of Seville, Seville, Spain Duration: 09 Dec 2016 → 11 Dec 2016 http://www.cmstatistics.org/CMStatistics2016

Conference

Conference	10th International Conference on Computational and Financial Econometrics
Abbreviated title	CFE
Country/Territory	Spain
City	Seville
Period	09/12/2016 → 11/12/2016
Internet address	http://www.cmstatistics.org/CMStatistics2016

Cite this

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AB - Bull and bear markets receive considerable media and academic attention. It is widely believed that such states are important determinants of wider market dynamics, yet no agreed definition exists. This paper investigates frameworks for ex post classification of asset prices in two-state (bull and bear) markets. An emphasis is placed on identifying state transition points that might achieve consensus. A number of potential difficulties with existing methodologies are highlighted. A principle-based approach is adopted from which a new, flexible, hierarchical methodology is proposed that addresses these issues and permits varying degrees of resolution allowing secondary trends such as bear rallies to be incorporated. The methodology is shown to be optimal under one measure of performance.

M3 - Abstract

T2 - 10th International Conference on Computational and Financial Econometrics

Y2 - 9 December 2016 through 11 December 2016

ER -

A top-down approach to identifying bull and bear market states

Abstract

Conference

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