A bifurcation model of market returns

We propose a bifurcation model of market returns to describe transitions between an ‘over-reaction’ mean regressive state and ‘under-reaction’ trend persistent states. Since July 1929, the Dow Jones Industrial Average has exhibited non-stationary state transition behavior, including: (1) mean regressive behavior during crisis situations during the Great Depression of the 1930s and again in the crisis of 2008 when the availability of credit was...