Using Recession Indicators to Date Financial Crises

Summary

The document considers how to choose an objective end date for historical financial crises when comparing market correlation matrices. The questioner studies broad indices across equities, foreign exchange, credit, and commodities, and mentions principal component analysis and random matrix theory as tools for comparing pre-crisis and crisis periods. The suggested starting point is to consult published recession indicators as an external reference for dating downturns.

This offers a practical proxy that can make crisis windows more consistent than choosing end dates by intuition alone. However, recession dates and financial-crisis endpoints are not necessarily the same: market stress can begin or ease before an economic recession starts or ends. The brief answer provides no rule for reconciling that mismatch, no comparison with market-based indicators, and no evidence that the proposed proxy fits every crisis. Researchers should state how they define a crisis and test whether their results change under alternative end dates.

Key ideas

• Published recession indicators can provide an external reference for dating downturns.
• Economic recession dates may differ from the beginning or end of market stress.
• A crisis study should define its dating rule and assess sensitivity to alternative windows.
• The answer suggests a proxy but does not evaluate it against other dating methods.

Tags

# End Dates of Financial Crises


# End Dates of Financial Crises












I am analyzing past financial crises, comparing the correlation structure amongst 20 broad market indices (equities, FX, credit, commodities) during different crises using amongst other things PCA and random matrix theory.

For every crisis I want to compare the pre-crises matrix to the crisis matrix. It is normally quite easy to identify the start date of a crisis given the discontinuous jumps but it is much harder to nail down the end date of a crisis. Everything I think of seems very subjective.

Anyone have any ideas of a more objective way to identify the end dates of past crises?

Thanks

## Answer by J-F (score 2)

https://quant.stackexchange.com/a/41198

You could always look at published recession indicators, such as the one below.

https://fred.stlouisfed.org/series/USREC

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