Asia-Pacific Financial Markets

, Volume 19, Issue 2, pp 99–117 | Cite as

Identifying Bull and Bear Markets in Japan

  • Mai Shibata


This study investigates the returns and volatility of bull and bear markets as represented by the Tokyo Stock Price Index (TOPIX). Our results show that bull markets are characterized by high returns and low volatility and that the opposite is true for bear markets. Further, this study uncovers a relationship between the duration of bull and bear markets and the point at which the TOPIX has turned from bull to bear and vice versa. Our results indicate that a bull or bear market has a higher probability of continuing as the duration of market’s current trend lengthens. If a bull or bear market trend persists for more than nine months, its probability of continuing approaches 1. Conversely, the transition from a rising to a declining market, and vice versa, is more likely to occur when the previous trend has persisted for less than nine months.


Bull and bear markets Volatility TOPIX Markov switching model Duration 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Bry, G. & Boschan, C. (1971). Cyclical analysis of time series: Selected procedures and computer programs. National Bureau of Economic Research.Google Scholar
  2. Cuñado J., Gil-Alana L.A., Perezde Gracia F. (2008) Stock market volatility in US bull and bear markets. Journal of Money, Investment and Banking 1: 4–32Google Scholar
  3. Hamilton J. D. (1989) A new approach to the economic analysis of nonstationary time series and business cycle. Econometrica 57(2): 357–384CrossRefGoogle Scholar
  4. Hamilton J. D. (1994) Time series analysis. Princeton University Press, PrincetonGoogle Scholar
  5. Harding D., Pagan A. (2002) A comparison of two business cycle dating methods. Journal of Economic Dynamics & Control 27: 1690–1691Google Scholar
  6. Isogai A., Kanoh S., Tokunaga T. (2008) A further extension of duration-dependent models. European Journal of Finance 14(5): 427–449CrossRefGoogle Scholar
  7. Lam P. (2004) A Markov-switching model of GNP growth with duration dependence. International Economic Review 45(1): 175–204CrossRefGoogle Scholar
  8. Ljung L., Box G. (1978) A measure of lack of fit in time-series models. Biometrika 67: 297–303CrossRefGoogle Scholar
  9. Maheu J. M., McCurdy T. H. (2000) Identifying bull and bear markets in stock returns. Journal of Business & Economic Statistics 18(1): 100–112CrossRefGoogle Scholar
  10. Shibata, M. (2010). Identifying Bull and Bear markets and statistical analysis of return in Japan (in Japanese). JAFEE Journal, pp. 186–220.Google Scholar

Copyright information

© Springer Science+Business Media, LLC. 2011

Authors and Affiliations

  1. 1.College of BusinessRikkyo UniversityToshima, TokyoJapan

Personalised recommendations