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Seasonality and regime switching in equity markets: evidence from the US and UK

Seasonality and regime switching in equity markets: evidence from the US and UK This study investigates whether cyclical turning points in the U.S. and U.K. stock markets are unevenly distributed over the year, that is, whether they are more likely to occur during certain months of the year. In examining this form of periodic seasonality, a Markov switching‐model is applied to U.S. and U.K. stock market chronologies of monthly peak and trough dates for the periods May 1835 through March 2000 and May 1836 through September 2000, respectively. In order to provide some evidence on robustness with respect to the sample data, results are obtained for the entire sample periods as well as for various sub‐. For both markets, the evidence indicates that while the probability of moving from an expansion to a contraction does not depend on the month of the year, the probability of switching from a contraction is greater for some months. Additionally, the durations of contractions, but not expansions, are dependent on the month of the year in which they begin. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Finance Emerald Publishing

Seasonality and regime switching in equity markets: evidence from the US and UK

Managerial Finance , Volume 30 (12): 31 – Dec 1, 2004

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Publisher
Emerald Publishing
Copyright
Copyright © 2004 Emerald Group Publishing Limited. All rights reserved.
ISSN
0307-4358
DOI
10.1108/03074350410769399
Publisher site
See Article on Publisher Site

Abstract

This study investigates whether cyclical turning points in the U.S. and U.K. stock markets are unevenly distributed over the year, that is, whether they are more likely to occur during certain months of the year. In examining this form of periodic seasonality, a Markov switching‐model is applied to U.S. and U.K. stock market chronologies of monthly peak and trough dates for the periods May 1835 through March 2000 and May 1836 through September 2000, respectively. In order to provide some evidence on robustness with respect to the sample data, results are obtained for the entire sample periods as well as for various sub‐. For both markets, the evidence indicates that while the probability of moving from an expansion to a contraction does not depend on the month of the year, the probability of switching from a contraction is greater for some months. Additionally, the durations of contractions, but not expansions, are dependent on the month of the year in which they begin.

Journal

Managerial FinanceEmerald Publishing

Published: Dec 1, 2004

Keywords: Equity capital; Stock market; Seasonal sales; United States of America; United Kingdom

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