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International Conference of the Thailand Econometrics Society

TES 2019: Structural Changes and their Econometric Modeling pp 756–774Cite as

An Analysis of Stock Market Cycle with Markov Switching and Kink Model

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Part of the book series: Studies in Computational Intelligence ((SCI,volume 808))

Abstract

The objectives of this paper are to study the regime changes in the stock market in the USA, Germany, and Japan and to study the relationship between various factors and return of the stock market in each regime. In this study, we use the Fama–French three-factor model to estimate the return of the stock market. In addition, we have applied the Markov Switching Regression Model and the Regression kink with an unknown threshold model to estimate the Fama–French three-factor model. The data were collected from the Thomson Reuter Data stream. The complete data set covered the period from March 1998 to January 2018. The monthly data returns of three factors in the Developed Market from Kenneth R. French from March 1998 to January 2018 in Europe, North America, and Japan. The empirical results showed that, in the USA and Germany, the factors that affect the stock market return are market factors and size factors. In Japan, all factors affect the stock market return. The use of the MSkink model for stock market analysis in the Fama–French three-factor model is more appropriate than the Linear model and the Markov switching model.

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Acknowledgments

The authors wish to thank Woraphon Yamaka and Paravee Maneejuk for their coding assistance.

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Authors and Affiliations

  1. Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand

    Konnika Palason & Roengchai Tansuchat

Authors
  1. Konnika Palason
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  2. Roengchai Tansuchat
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Correspondence to Roengchai Tansuchat .

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Editors and Affiliations

  1. Department of Computer Science, University of Texas at El Paso, El Paso, TX, USA

    Vladik Kreinovich

  2. Faculty of Economics, Chiang Mai University, Chiang Mai, Thailand

    Songsak Sriboonchitta

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Palason, K., Tansuchat, R. (2019). An Analysis of Stock Market Cycle with Markov Switching and Kink Model. In: Kreinovich, V., Sriboonchitta, S. (eds) Structural Changes and their Econometric Modeling. TES 2019. Studies in Computational Intelligence, vol 808. Springer, Cham. https://doi.org/10.1007/978-3-030-04263-9_57

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