Structural Breaks (Bull or Bear?)
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When I spotted the bfast R package, I could not resist attempting to apply it to identify bull and bear markets. For all the details that I do not understand, please see the references:
I believe the result on the S&P 500 (even with a high h and only one iteration) is a fairly close marker for bull and bear markets, and I thoroughly enjoyed applying forestry techniques to financial time series.
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From TimelyPortfolio |
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From TimelyPortfolio |
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From TimelyPortfolio |
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#analyze breakpoints with the R package bfast | |
#please read the paper | |
#Verbesselt J, Hyndman R, Newnham G, Culvenor D (2010) | |
#Detecting Trend and Seasonal Changes in Satellite Image Time Series. | |
#Remote Sensing of Environment, 114(1), 106–115. | |
#http://dx.doi.org/10.1016/j.rse.2009.08.014 | |
require(bfast) | |
require(quantmod) | |
getSymbols("^GSPC",from="1950-01-01") | |
#convert to log price | |
GSPC.monthly <- log(to.monthly(GSPC)[,4]) | |
#get monthly returns for the close price | |
#not necessary, leave in price form | |
#GSPC.return <- monthlyReturn(GSPC[,4]) | |
#need ts representation so do some brute force conversion | |
GSPC.ts <- ts(as.vector(GSPC.monthly["1951-01::"]),start=c(1951,1),frequency=12) | |
#look at the stl Seasonal-Trend decomposition procedure already in R | |
GSPC.stl <- stl(GSPC.ts,s.window="periodic") | |
plot(GSPC.stl,main="STL Decomposition of S&P 500") | |
#get the results from bfast | |
#adjusting h lower will result in more breakpoints | |
GSPC.bfast <- bfast(GSPC.ts,h=0.2,max.iter=1,season="none") | |
plot(GSPC.bfast,type="components",ylim=c(3,max(GSPC.monthly)+1),main="S&P 500 with bfast Breakpoints and Components") | |
plot(GSPC.bfast,type="trend",ylim=c(3,max(GSPC.monthly)+1),main="S&P 500 with bfast Trend Breakpoints") | |
#see everything with type="all" but in bfast calculation set seasonal to "none" | |
#play away with this | |
#plot(GSPC.bfast,type="all") | |
#do some additional plotting | |
#[[1]] is used since for speed I only did one iteration | |
#could plot each iteration if I did multiple | |
plot(GSPC.bfast$Yt/GSPC.bfast$output[[1]]$Tt-1, | |
main="bfast Remainder as % of S&P 500 Price", | |
xlab=NA, ylab="remainder (% of price)",bty="l") | |
#add vertical line for the breakpoints | |
abline(v=breakdates(GSPC.bfast$output[[1]]$bp.Vt),col="gray70") | |
#add horizontal line at 0 | |
abline(h=0,col="black",lty=2) | |
text(x=breakdates(GSPC.bfast$output[[1]]$bp.Vt),y=par("usr")[3]+.01, | |
labels=breakdates(GSPC.bfast$output[[1]]$bp.Vt,format.times=TRUE), | |
srt=90,pos=4,cex=0.75) |
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