Angyal (Apolzan), Carmen-Maria and Aniş, Cecilia–Nicoleta (2012): Stock Market Cycles and Future Trend Estimation. Published in: Crisis Aftermath: Economic policy changes in the EU and its Member States, Conference Proceedings, Szeged, University of Szeged , Vol. ISBN 9, (2012): pp. 27-35.
Download (691kB) | Preview
Contemporary period was an unprecedented growth of stock markets in both developed economies and in emerging ones. The process of financial development has led to substantial changes in the behavior of the stock markets. Recent articles have been oriented to determine the relationship between financial liberalization and stock market cycles (Edwards et al. 2003; Kaminsky and Schmukler 2003). These articles have analyzed the stock exchanges in different countries focusing on the market movements in growth phases (bull) and downward (bear).
This study uses the ARIMA methodology, that consists in estimating Minimum Mean Square Error (MMSE - minimum mean square error or ”signal extraction”) of hidden and unobserved components existing in a time series as it is developed in the work of Cleveland and Tiao (1976), Burman (1980), Hillmer and Tiao (1982), Bell and Hillmer (1984) and Maravall and Pierce (1987).
The study uses data representing quarterly closing prices for the period 01.03.1998 – 01.06.2011 (52 observations) of a number of 5 european indices: AEX (Netherlands), ATX (Austria), CAC40 (France), DAX (Germany), FTSE (UK) and a US stock index – Dow Jones Industrial Average. Chosen indices characterize the evolution of mature stock markets. The data used are taken from Thompson Reuters database. The study allows identification, for the mature stock markets, the three distinct cycles in the period 1998–2011, cycle I – 1998–2002, cycle II – 2003–2008, cycle III – 2009–present. The moments of instability triggered by the actual crisis and the dot.com crisis significantly influenced all stock markets, the effects of the latter influence and their future trend. Thus, we identify a medium-term downward trend for European indices CAC40 and AEX and short-term index ATX. The estimation for European indices DAX, FTSE and Dow Jones Industrial Average US shows a medium-term growth trend.
|Item Type:||MPRA Paper|
|Original Title:||Stock Market Cycles and Future Trend Estimation|
|Keywords:||stock market; cycle stock; stock index; ARIMA model|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets
G - Financial Economics > G0 - General > G01 - Financial Crises
|Depositing User:||Beata Farkas|
|Date Deposited:||06. Aug 2012 14:01|
|Last Modified:||07. Sep 2015 02:23|
Admiral Markets (2011): Analiza ciclurilor bursiere (The analyse of the stock market cycles), available at www.admiralmarkets.com.
Bell, W.R. (1984): Signal Extraction for Nonstationary Time Series. Annals of Statistics, 12, pp. 646-664.
Bell, W.R. – Hillmer, S.C. (1984): Issues involved with the Seasonal Adjustment of Economic Time Series. Journal of Business and Economic Statistics, 2, pp. 291-320.
Burman, J.P. (1980): Seasonal Adjustment by Signal Extraction. Journal of the Royal Statistical Society A, 143, pp. 321-337.
Cleveland, W.P. – Tiao, G.C. (1976): Decomposition of Seasonal Time Series: A Model for the X-11 Program. Journal of the American Statistical Association, 71, pp. 581-587.
Edwards, S. – Biscarri, J.G. – Gracia, F.P. (2003): Stock market cycles, financial liberalization and volatility. Journal of International Money and Finance, 22.
Hillmer, S.C. – Tiao G.C. (1982): An ARIMA-Model Based Approach to Seasonal Adjustment. Journal of the American Statistical Association, 77, pp. 63-70.
Kaminsky, G. – Schmukler, S. (2003): Short-Run Pain, Long-Run Gain: The Effects of Financial Liberalization. NBER Working Paper, 9787.
Muntianu, S. (2005): Ciclurile si dinamica pietelor (The cycles and the stock markets dynamics), Vanguard.