Using Change-Point Detection to Identify Structural Changes in Stock Market: Application to Russell 2000

Abstract

We term a stock that rises more than 10 times over a short period (less than 3 years) as a ten-bagger stock. Several tenbagger stocks have existed since the past, and will continue to do so. To identify the characteristics of the ten-bagger stocks that appeared since the early 2000s to the most recent ones, and ultimately, to predict future ten-bagger stocks, we tried to find a connection with the Russell 2000 index. We used Pettitt’s test to find the change-point in the Russell 2000 industry index and found a connection with the ten-bagger stocks. This study attempts to predict ten-bagger stocks through case analysis and draws two conclusions. Through this analysis, we could identify new growth sectors and stocks in KOSPI market such as 1st somatic analyzer, 1st lactic acid bacterium in 2012, 1st anode material company, 1st cathode material company, and No. 1 stomach anticancer drugs company in 2017.