Duration Dependence in Stock Prices

Duration Dependence in Stock Prices: An Analysis of Bull and Bear Markets∗

This paper investigates the presence of bull and bear market states in stock price dynamics. A new definition of bull and bear market states based on sequences of stopping times tracing local peaks and troughs in stock prices is proposed. Duration dependence in stock prices is investigated through posterior mode estimates of the hazard function in bull and bear markets. We find that the longer ...

Stock prices and house prices: Which one affects the other?

Stocks and houses as two major assets which play important role in the balance sheet of Iranian households. Changes in two markets have a large influence on wealth and the general economy. The purpose of this study is to examine the relationship between stock and house prices over a thirty-year period using vector auto-regression (VAR). Using yearly data for the period from 1985 to 2013, we con...

Forecasting UK stock prices

The Vector Autoregressive (VAR) model, the Error Correction Model (ECM), and the Kalman Filter Model (KFM) are used to forecast UK stock prices. The forecasting performance of the three models is compared using out of sample forecasting. The results show that the forecasting performance of the ECM is better than that of the VAR and the KFM, and that the VAR performs a forecasting better than th...

Modelling Stock Prices

“Normality” of Stock Prices

“Normality” of Stock Prices Bo Shi Abstract. The Black-Scholes Model, often simply called Black-Scholes, models the varying price of financial instruments over time: stocks in particular. This model assumes that returns on the underlying stock are lognormally distributed, which can be reasonable for many assets that offer options. However, from a selection of 100 stock histories, I found that a...