For stock market watchers, the year 2002 will go down in the history books for a number of reasons. Globally, it marked the longest running bear market since the post-war years in the 1940s.

It was also the year of the corporate accounting scandal as industry giants like Enron and Worldcom collapsed and investors lost faith in corporate America and its book-keeping standards.

The Irish market was not immune to the global trends. For the first time since 1992, the ISEQ index of leading Irish shares posted a loss while, in Elan, it had its very own high-profile accounting scandal.

Having barely managed to remain in positive territory in 2001, local share prices succumbed to the gloom pervading world stock markets this year and closed down 30 per cent.

The year started badly and went steadily downhill from there. No sooner had traders and fund managers recovered from Christmas than the first piece of bad news arrived in mid-January from the market's largest stock, Elan.

The pharmaceutical group, which accounted for 25 per cent of the ISEQ, announced the suspension of its Alzheimer's treatment trials and investors rushed to dump the shares. But there was worse to follow.

Growing concerns over the company's accounting policies sparked such a loss of confidence in the once high-flying stock that the share price went into freefall, losing more than 90 per cent of its value over the course of the year.

Given its large weighting in the ISEQ, Elan's collapse accounted for a hefty chunk of the Irish market's losses last year. Excluding Elan, the ISEQ's losses were in the low double digits, little consolation for the many investors who held the stock either directly or indirectly through their pension or investment funds.

Investors were still struggling to come to terms with Elan's woes when they were hit with another shock in early February when AIB announced it had been the victim of a complex fraud. The revelation that rogue trader John Rusnak had racked up losses of $691 million prompted panic selling of the bank's shares.

But, helped by the subsequent investigation into the fraud which firmly established that it was an isolated occurrence and changes to its regulatory and compliance regime, AIB shares later rebounded to close the year 5 per cent higher.

However, the bad news for investors in Irish blue-chip stocks was not yet at an end.

In late September, the ever-reliable CRH surprised investors when it said one of its companies had been named in asbestos litigation in the US.

Although the building materials group said it did not believe the litigation would have a material impact on the group's financial position, the shares slumped by 15 per cent.

Allied to the deteriorating climate in the construction sector worldwide, the share price has remained under pressure, losing more than 30 per cent over the course of the year.

With three of the top four stocks having delivered a scare, only Bank of Ireland enjoyed a clean sheet heading into the last quarter. This did not last long, however.

Just days after the CRH announcement, news of the bank's doomed attempt to gain control of Britain's Abbey National leaked. It did not go down well with investors and the share price dropped by 15 per cent in the following days.

But despite AIB's troubles in the US and Bank of Ireland's ill-fated British venture, the Irish financial sector gained ground over the year as a whole, massively outperforming its European peers.

It also boasted two of the top performing stocks on the Irish market. Shareholders in Anglo Irish Bank and First Active were among the few smiling by year-end after the stocks delivered gains of 64 per cent and 62 per cent respectively.

But the broad run of industrial stocks suffered, prompting corporate activity of a kind not seen for some years. Share buybacks returned to fashion while the management buyout (MBO) became all the rage, claiming one of the best known stocks on the Dublin market.

Jefferson Smurfit, long a stalwart of the Irish market, exited the plc stage after shareholders accepted a $3.7 billion takeover bid from US private equity house, Madison Dearborn in August.

The bid, which involved Smurfit chairman and chief executive, Dr Michael Smurfit, removed the sixth largest company on the Irish Stock Exchange. And more were to follow.

Green Property was taken private in September after a $1.05 billion bid, led by managing director Mr Stephen Vernon.

Elsewhere in the property sector, after an epic battle, Mr Liam Carroll succeeded in gaining control of Dunloe Ewart which should depart the stock market early in the New Year.

The number of stocks leaving the market was not matched by new arrivals. Planned flotations by drinks and snacks group C&C and software firm Spectel were pulled during the summer, making last year the second in a row in which no new company was brought to the Irish market.

Heading into 2003, there are no prospective flotation candidates on the horizon while quite a few companies seem set to go private.

Riverdeep, Alphyra, Conduit are all the subject of management buyouts while Arnotts, whose management considered an MBO earlier in the year, has rejected two bids from Carrgran, a bid vehicle backed by Lehman Brothers.And what of markets overall?

Should investors start to drip-feed money back into equity markets, hopeful that the worst is behind them? Or could they be facing the unthinkable, the fourth year of a bear market?

According to stockbrokers, the performance of the world economy, especially its US engine, and the outcome of the Iraqi situation, will be the crucial issues for stock markets in the year ahead. Goodbody forecasts 15 per cent earnings growth in the Irish market and sees the ISEQ advancing to 5,000 by the end of 2003. By contrast, Davy does not expect it to be much changed from its current level of 4,000 in 12 months' time.

"It's still tough out there," says Davy's Mr Robbie Kelleher.

"The world economy is in bad shape and markets will struggle to do well against that background."

Somewhere in between lies Mr Joe Dwyer of fund managers Montgomery Oppenheim who believes markets should deliver returns of 5 to 7 per cent next year, particularly as bond markets are now at levels that are no longer attractive.

But investors will need to be selective, opting for companies with strong balance sheet and decent dividend yields, he says, adding: "It's unlikely that it will be another negative year but we wouldn't be raging bulls either."