| Thanks to Vince, here's a study I did comparing business bankruptcies in 1 year vs. | ||||||||
| Market returns the next year. Hypothesis is that more bankruptcies denote a healthy economy | ||||||||
| and should mean higher market returns. Make your own conclusions and feel free to comment. | ||||||||
| In a rush to fly to midwest, otherwise I'd make it prettier… | ||||||||
| -- Ari Siegel, 6/30/2004 | ||||||||
| Regressed year t total biz bankruptcies vs. year t+1 major us equity markets return from 1981-2003 | ||||||||
| Results: | ||||||||
| +1000 bankruptcies above Mu in year t = +0.22% return in year t+1 | ||||||||
| N=23 | ||||||||
| R^2=0.031 | ||||||||
| Intercept= -0.127 (should be more like markets' avg annual return of 0.13) Std error=0.27% | ||||||||
| T-stat=0.82 | ||||||||
| Interpretation: More bankruptcies does = higher return next year, but data issues | ||||||||
| Problems: | ||||||||
| Few observations, Low t-stat (z-score), non-significant f-score, upper/lower 95% confidence intervals | ||||||||
| overlap, if look at raw data set just doesn't seem statistically significant | ||||||||
| Note: got similar results regressing year t bankruptcies vs. same year market return. | ||||||||
| Data Set (year t bankruptcies vs. year t+1 mkt return): | ||||||||
| Next Year's | ||||||||
| Return | ||||||||
| All | NYSE | |||||||
| Business | AMEX | |||||||
| Year | Filings(000s) | NASDAQ | ||||||
| 1980 | 44 | -17.40% | ||||||
| 1981 | 48 | 7.00% | ||||||
| 1982 | 69 | 9.20% | ||||||
| 1983 | 62 | -10.30% | ||||||
| 1984 | 64 | 18.00% | ||||||
| 1985 | 71 | 2.10% | ||||||
| 1986 | 81 | -11.60% | ||||||
| 1987 | 82 | 4.10% | ||||||
| 1988 | 64 | 15.00% | ||||||
| 1989 | 63 | -19.50% | ||||||
| 1990 | 65 | 20.20% | ||||||
| 1991 | 72 | -4.40% | ||||||
| 1992 | 71 | -1.90% | ||||||
| 1993 | 62 | -14.20% | ||||||
| 1994 | 52 | 22.20% | ||||||
| 1995 | 52 | 7.70% | ||||||
| 1996 | 54 | 16.90% | ||||||
| 1997 | 54 | 8.90% | ||||||
| 1998 | 44 | 12.00% | ||||||
| 1999 | 44 | -24.60% | ||||||
| 2000 | 35 | -24.70% | ||||||
| 2001 | 40 | -34.40% | ||||||
| 2002 | 39 | 19.70% | ||||||