Long-run bulls and bears

Rui Albuquerque, Martin Eichenbaum, Dimitris Papanikolaou, Sergio Rebelo*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

18 Scopus citations


A central challenge in asset pricing is the weak connection between stock returns and observable economic fundamentals. We provide evidence that this connection is stronger than previously thought. We use a modified version of the Bry-Boschan algorithm to identify long-run swings in the stock market. We call these swings long-run bull and bear episodes. We find that there is a high correlation between stock returns and fundamentals across bull and bear episodes. This correlation is much higher than the analogous time-series correlations. We show that several asset pricing models cannot simultaneously account for the low time-series and high episode correlations.

Original languageEnglish (US)
Pages (from-to)S21-S36
JournalJournal of Monetary Economics
StatePublished - Dec 1 2015


  • Stock market returns

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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