Is there such a thing as bull or bear markets?

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selters
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Is there such a thing as bull or bear markets?

Post by selters » Thu Aug 09, 2018 4:07 pm

Is there really such a thing as bull or bear markets? Or are these merely labels that we in hindsight attach to time periods in the stock market that fit certain quantitative criteria? Does it mean anything for investors that this bull market has lasted for nearly ten years? Or what if we count use intraday data instead of closing data? Then there was a bear market in 2011. Or what if we only count bull markets from when the market reaches a new all time high? Then this bull market has only lasted since 2013.

All this talk about bull or bear markets sounds like financial pornography to me. It really reminds me of the dozens of quantitative indicators that "technical analysts" use. Bogleheads don't care about trend lines, Fibonacci retracements, head and shoulders patterns, the relative strength index or the MACD oscillator. Neither should we care about whether we are in a bull market or a market. Whether or not we are in a bear of bull market, it has no predictive value for an investor, as far as I know.

Personally I don't reject all kinds of trend following models. I think there are reasonable ways to invest wisely using rules based on quantitative data. But bull or bear market is just another quantitative data point.

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willthrill81
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Re: Is there such a thing as bull or bear markets?

Post by willthrill81 » Thu Aug 09, 2018 4:08 pm

selters wrote:
Thu Aug 09, 2018 4:07 pm
Or are these merely labels that we in hindsight attach to time periods in the stock market that fit certain quantitative criteria?
Yes.
selters wrote:
Thu Aug 09, 2018 4:07 pm
Does it mean anything for investors that this bull market has lasted for nearly ten years?
No. The length of a bull (or bear) market does not have a significant impact on how long it will last.

And the current bull market is only a couple of years old.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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k66
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Re: Is there such a thing as bull or bear markets?

Post by k66 » Fri Aug 10, 2018 8:56 am

willthrill81 wrote:
Thu Aug 09, 2018 4:08 pm
...
And the current bull market is only a couple of years old.
Mark Hulbert wrote: Classification challenges like this one cry out for an objective definition. One firm that has responded to the clarion call is Ned Davis Research, defining a bull market as a 30% rise in the DJIA or the Value Line Geometric Index after 50 calendar days or a 13% rise in the DJIA after 155 calendar days. While you can quibble with this or that aspect of these criteria, I challenge you to come up with another objective definition that does a better job. Most who try their hand at doing so quickly find that their proposed criteria either determine that there have been too many or too few bull markets relative to what we traditionally assume.
I am assuming that the 30% figure above is a typo--maybe 3% was intended?

And because Mr. Hulbert made the offer, I would perhaps suggest using exponential moving average cross-overs as Bull-Bear turnover points. But even if this method might seem more objective, it really isn't because one still has to arbitrarily decide on which two time-frames should be compared. The longer period should perhaps be the "classic" 200-day, but which shorter period to use? Maybe 30-day or 60-day? Whatever periods are chosen, it will, as Mr. Hulbert points out, ultimately be non-objective.
LOSER of the Boglehead Contest 2015 | lang may yer lum reek

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Earl Lemongrab
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Re: Is there such a thing as bull or bear markets?

Post by Earl Lemongrab » Fri Aug 10, 2018 2:46 pm

The problem for me is when people talk about the type of market as if it had predictive power. For quite a while after 2009, a number of people were saying things like, "Oh it's just cyclic bull in a secular bear market." As if that meant something you do use for planning. Of course, then such talk died away as the market chugged along.
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acegolfer
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Re: Is there such a thing as bull or bear markets?

Post by acegolfer » Fri Aug 10, 2018 6:53 pm

Some (but not all) academics believe in momentum. They even argue there's a momentum factor (#4 factor in addition to market, size, value) in asset pricing. For more, google "Carhart four-factor model"

mortfree
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Re: Is there such a thing as bull or bear markets?

Post by mortfree » Fri Aug 10, 2018 9:34 pm

k66 wrote:
Fri Aug 10, 2018 8:56 am
willthrill81 wrote:
Thu Aug 09, 2018 4:08 pm
...
And the current bull market is only a couple of years old.
Mark Hulbert wrote: Classification challenges like this one cry out for an objective definition. One firm that has responded to the clarion call is Ned Davis Research, defining a bull market as a 30% rise in the DJIA or the Value Line Geometric Index after 50 calendar days or a 13% rise in the DJIA after 155 calendar days. While you can quibble with this or that aspect of these criteria, I challenge you to come up with another objective definition that does a better job. Most who try their hand at doing so quickly find that their proposed criteria either determine that there have been too many or too few bull markets relative to what we traditionally assume.
I am assuming that the 30% figure above is a typo--maybe 3% was intended?

3% in 50 days to define a bull? Seems like a low expectation. However I think 30% in 50 days sounds like a lofty expectation.

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k66
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Re: Is there such a thing as bull or bear markets?

Post by k66 » Mon Aug 13, 2018 1:51 pm

mortfree wrote:
Fri Aug 10, 2018 9:34 pm
k66 wrote:
Fri Aug 10, 2018 8:56 am
willthrill81 wrote:
Thu Aug 09, 2018 4:08 pm
...
And the current bull market is only a couple of years old.
Mark Hulbert wrote: Classification challenges like this one cry out for an objective definition. One firm that has responded to the clarion call is Ned Davis Research, defining a bull market as a 30% rise in the DJIA or the Value Line Geometric Index after 50 calendar days or a 13% rise in the DJIA after 155 calendar days. While you can quibble with this or that aspect of these criteria, I challenge you to come up with another objective definition that does a better job. Most who try their hand at doing so quickly find that their proposed criteria either determine that there have been too many or too few bull markets relative to what we traditionally assume.
I am assuming that the 30% figure above is a typo--maybe 3% was intended?

3% in 50 days to define a bull? Seems like a low expectation. However I think 30% in 50 days sounds like a lofty expectation.
3% in 50 (calendar) days is not really that low. Simple (but dangerous!) extrapolation to 1-year implies between 21% and 24% depending on how you elect to extrapolate.
LOSER of the Boglehead Contest 2015 | lang may yer lum reek

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