Author and guest post by Eren Ocakverdi
Professional life of a researcher who follows or responsible from an emerging market can become so miserable when things suddenly change and the past experience does not hold anymore. As a practitioner you can get used to it over time, but it’s a whole different story when it comes to identifying empirical relationships between market indicators as part of your job.
History can be a really good gauge to understand how such indicators are linked to one another only if you look through a proper glass. Abrupt changes, structural breaks or transition periods may alter such relationships so much that they would be misidentified with those traditional methods where the underlying structure is assumed fixed over the full sample.
