Author(s): Samuel Tabot Enow
Predicting directional trends in financial markets without significant reversals has emerged as a pivotal yet least explored area in the arena of financial markets. Hence, the concept of monotonicity in financial markets. The aim of this study was to investigates the monotonicity properties across international stock markets, focusing on the S&P 500, DAX, and Nikkei 225 from 2000 to 2023. Employing a multi-method framework integrating non-parametric tests, quantile regression, and structural break analysis, the research examined how structural, behavioral, and macroeconomic factors influence trend sustainability. The findings revealed divergent monotonic behaviors: the S&P 500 exhibits a weak upward trend driven by post-crisis monetary policies and bull-market resilience, while the DAX and Nikkei 225 showed no significant trends, reflecting Europe’s energy crises and Japan’s demographic challenges. The quantile regression results revealed asymmetric trend strengths across market regimes, with the S&P 500 demonstrating bullish responsiveness and bear-market vulnerability. Also, the structural breaks align with macroeconomic shocks, including the 2008 Global Financial Crisis, COVID-19 pandemic, and policy interventions like Abenomics. The findings underscore the role of institutional stability, liquidity, and exogenous shocks in shaping market trends. Investors can leverage these insights for adaptive strategies, prioritizing the United States equities in bullish phases while hedging against cyclical and systemic risks in European and Japanese markets. This study bridges gaps in cross-market comparative analyses, offering empirical evidence on the episodic nature of monotonicity in a dynamic global financial landscape.