Amplitude-Duration-Persistence Trade-off Relationship for Long Term Bear Stock Markets

Li, Ziran and Sun, Jiajing and Wang, Shouyang (2013): Amplitude-Duration-Persistence Trade-off Relationship for Long Term Bear Stock Markets.

Abstract

We study the mechanism that controls the shape of the bear market through an information diffusion perspective, and establish a frontier of market decline, in terms of a trade-off between amplitude, duration and the rate of information diffusion. Empirical analysis using data from 15 stock markets confirms the existence of this trade-off relationship. An algorithm for generating the frontier using real data is proposed and applied in several market scenarios. The results suggest that the behaviour of international stock markets during the current US credit crunch is similar to that in previous bear markets in terms of the trivariate trade-off.

• Item Type: MPRA Paper
• Language: English
• Keywords: We study the mechanism that controls the shape of the bear market through an information diffusion perspective, and establish a frontier of market decline, in terms of a trade-off between amplitude, duration and the rate of information diffusion. Empirical analysis using data from 15 stock markets confirms the existence of this trade-off relationship. An algorithm for generating the frontier using real data is proposed and applied in several market scenarios. The results suggest that the behaviour of international stock markets during the current US credit crunch is similar to that in previous bear markets in terms of the trivariate trade-off.
• Subjects: G - Financial Economics > G0 - General; G - Financial Economics > G0 - General > G01 - Financial Crises

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