The duration dependence of stock market cycles has been investigated using the Markov switching model where the market conditions are unobservable. In conventional modeling, restrictions are imposed such that the transition probability is a monotonic function of duration, which is truncated at a certain value. This paper proposes a model that is free from these arbitrary restrictions and nests the conventional models. In the model, the parameters that characterize the transition probability are formulated in the state space. Empirical results from several stock markets show that the duration structures greatly differ depending on countries. These structures are not necessarily monotonic functions of duration and, therefore, cannot be described by the conventional models.duration, world stock markets, Markov switching model, non-parametric model, Gibbs sampling, marginal likelihood,
This paper investigates the theory of land price formation, taking into consideration the fact that an``option'' is implicitly attached to land. Using a theoretical model, it tries to explain the land price bubbles in Japan in the late 1980s as the result of investors' expectations of alternative uses of the land. The model is estimated and validated using data on the Tokyo metropolitan residential area. The modelling exercise also determines the extent to which the option contributes to the formation of land prices. It is shown that the separation of the land price from its fundamental value can be satisfactorily explained by the option property of land. JEL Classi®cation Numbers: C53, G12, R14.
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