The Impact of Subprime Mortgage Crisis on Islamic Banking and Islamic Stock Market

The main purpose of this article is to determine which factors and how contributed to the subprime mortgage crisis in the United States in 2007–2008, what their causal links and effects on the markets and the whole economy were, and to assess what actions could have been taken by the Federal Reserve and the Government in order to mitigate or prevent the consequences of subprime mortgage crisis and housing bubble. In order to obtain the research results, the authors performed a qualitative analysis of the scientific literature on the course of events and their development that led to the subprime mortgage crisis, and focused on the insufficiently regulated home mortgage market expansion, the impact on the subprime mortgage crisis of financial innovations and financial engineering, poorly evaluated systemic risks and policy undertaken by both the U.S. Government and the Federal Reserve before and after the crisis. The quantitative research focused on two main parts: firstly, analysis of the dependence between the causes of subprime mortgage crisis and the consequences, using a statistical and regression analysis, and secondly, an alternative path the Government and the Federal Reserve could have taken in their policy actions and the results they could have produced. The authors believe that the results of the research could give useful guidelines to the central bankers and government officials on how to make long-term decisions that can help in preparing for the financial distress, mitigating the consequences when the crisis strikes, accelerating the recovery and even preventing the crisis it in the future. The second part of the qualitative research will appear in the next issue of the journal.

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The Impact of International Hot Money in International Commodity Future Markets during the Subprime Mortgage Crisis

Advanced Materials Research ◽

10.4028/www.scientific.net/amr.171-172.744 ◽

2010 ◽

Vol 171-172 ◽

pp. 744-747

Author(s):

Qing Ye ◽

Li Yan Han

Keyword(s):

Correlation Coefficients ◽

Price Volatility ◽

Return Rate ◽

Subprime Mortgage ◽

International Commodity ◽

Mortgage Crisis ◽

Subprime Mortgage Crisis ◽

Commodity Future ◽

The Impact ◽

Hot Money

Behavior of traders including investors and speculators in commodity future markets are studied before and after the subprime mortgage crisis. We put our attention on quantity of traders hold positions instead of price volatility or capital return rate of commodity future markets. By standardize correlation coefficients of net positions we try to quantify the impact of speculative funds on behalf of international hot money in international commodity futures markets in the subprime mortgage crisis. Parametric and non-parametric tests are used in this paper. The empirical results reveal that investment directions of speculators do change in crisis and they connect more tightly with markets compared with investors for that their find more opportunities and higher return rate during the Subprime mortgage crisis.

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Revisiting Stock Market Integration Pre-Post Subprime Mortgage Crisis: Insight From BRIC Countries

Economics and Finance in Indonesia ◽

10.7454/efi.v61i2.507 ◽

2015 ◽

Vol 61 (2) ◽

pp. 120 ◽

Cited By ~ 1

Author(s):

Chin-Hong Puah ◽

Rayenda Khresna Brahmana ◽

Kai-Hung Wong

Keyword(s):

Stock Market ◽

Financial Crises ◽

Market Integration ◽

Subprime Crisis ◽

Subprime Mortgage ◽

Stock Market Integration ◽

Bric Countries ◽

Mortgage Crisis ◽

China Stock Market ◽

Subprime Mortgage Crisis

AbstractThis study revisits the long-run relationships and short-run dynamic causal linkages among BRIC stock market, with the particular attention to the 2008 subprime mortgage crisis. Extending related empirical studies, comparative analyses of pre-crisis, and post-crisis periods were conducted to comprehensively evaluate how stock market integration was affected by financial crises. In general, after employing cointegration test and VAR test, the results reveal the increase of stock market integration in BRICs after the subprime crisis. The evidence also found that China stock market is the most influential among the BRICs, in which China stock market has the ability to Granger cause the other three BRICs member countries. An important implication of our findings is that the degree of integration among countries tends to change over time, especially around periods marked by financial crises. AbstrakPenelitian ini mengkaji ulang hubungan jangka panjang dan hubungan kausal dinamis jangka pendek antara pasar modal negara-negara BRIC, terutama pada saat krisis subprime mortgage 2008. Pengayaan studi empiris yang terkait dan analisa perbandingan sebelum-sesudah krisis dilakukan untuk mengevaluasi secara komprehensif tentang bagaimana krisis keuangan memengaruhi integrasi pasar modal. Secara umum, setelah menggunakan uji kointegrasi dan uji VAR, hasil penelitian ini memperlihatkan peningkatan integrasi pasar modal di negara-negara BRIC setelah terjadinya krisis subprime. Penelitian ini juga membuktikan bahwa pasar modal Cina adalah pasar yang paling berpengaruh di antara negara BRIC, di mana pasar modal Cina memiliki kemampuan untuk memengaruhi secara Granger Causality tiga negara anggota BRIC lainnya. Implikasi penting dari temuan kami adalah bahwa tingkat integrasi antara negara-negara cenderung berubah dari waktu ke waktu, terutama sekitar periode yang ditandai oleh krisis keuangan.Kata kunci: Integrasi Pasar; Subprime Mortgage; Krisis Keuangan; BRICJEL classifications: F15; G15; G21; C32

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Are Green Fund Investors Really Socially Responsible?

Review of Pacific Basin Financial Markets and Policies ◽

10.1142/s0219091512500233 ◽

2012 ◽

Vol 15 (04) ◽

pp. 1250023 ◽

Cited By ~ 6

Author(s):

Huimin Chung ◽

Han-Hsing Lee ◽

Pei-Chun Tsai

Keyword(s):

Fund Flows ◽

Socially Responsible ◽

Subprime Mortgage ◽

Fund Flow ◽

The Social ◽

Significant Difference ◽

Mortgage Crisis ◽

Prior Literature ◽

Subprime Mortgage Crisis ◽

The Impact

This paper investigates the performance, fund characteristics, fund flow of green fund and the impact of subprime mortgage crisis on fund flow volatility. In terms of fund performance, our results show that there is no consistently significant difference between performance of green funds and conventional funds. As for fund characteristics, green funds are more sensitive to market and size risks compared to conventional funds, while they are less sensitive to value and momentum factors than conventional funds. Consistent with prior literature, there exists an asymmetric phenomenon for green funds, that is, fund flows of green funds are significantly related to lagged positive return but not significantly associated with lagged negative returns in normal market conditions. During the subprime mortgage crisis, both mature green and mature conventional funds experienced fund outflows. However, volatility of green funds flows is much lower than their conventional counterparts. Our results suggest that green fund investors can derive utility from the social responsibility attribute, and they are really more socially responsible when making investment decisions.

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Cross-Regional Connectedness in the United States’ Housing Market

E3S Web of Conferences ◽

10.1051/e3sconf/202123502033 ◽

2021 ◽

Vol 235 ◽

pp. 02033

Author(s):

Wen Yin

Keyword(s):

Stock Market ◽

Housing Market ◽

Systematic Risk ◽

Housing Markets ◽

The United States ◽

Financial Health ◽

Subprime Mortgage ◽

Risk Increase ◽

Mortgage Crisis ◽

Subprime Mortgage Crisis

The interconnectedness of markets is a useful measure of risk and therefore an indicator of economic stability. In this paper, the interconnectedness among housing markets in different metropolitan areas was analyzed. Interconnectedness between the housing market and other markets were also calculated. In regional studies, West Coast housing markets were found to be the most influential on housing markets elsewhere. Interestingly, overall connectedness across regions steadily increased prior to the subprime mortgage crisis, representing a systematic risk increase. When analyzing diverse markets in relation to the housing market, the stock market was found to have the highest interconnectedness, suggesting that financial health of stock market depend on financial health of housing market. The increased systematic risk due to high housing market interconnectedness coupled with the interdependence between the stock market and the housing market were key indicators of the subprime mortgage crisis. Such measures should be monitored in the future to avoid a similar economic disaster.

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BORROWING CAPACITY, FINANCIAL INSTABILITY, AND CONTAGION

International Journal of Theoretical and Applied Finance ◽

10.1142/s0219024918500607 ◽

2019 ◽

Vol 22 (01) ◽

pp. 1850060

Author(s):

YOUNGNA CHOI

Keyword(s):

United States ◽

The United States ◽

Financial Instability ◽

Subprime Mortgage ◽

Capacity Limitations ◽

Flow Of Funds ◽

Mortgage Crisis ◽

Subprime Mortgage Crisis ◽

Economic Constraints ◽

The Impact

We use the case of the 2007 United States subprime mortgage crisis to investigate the impact of borrowing capacity limitations on financial instability and contagion. We divide an economy into agents that interact via flow of funds and express the financial instability level of each agent as a function of time derivatives of its wealth, cash inflows, and borrowing capacity. We show that among these factors, the borrowing capacity, which is determined by other economic constraints, has the largest impact on financial instability. It is suggested that borrowing capacity limitations could even cause contagion through feedback loop formed by flow of funds. We use historical time series of the integrated macroeconomic accounts of the United Stated from 1960 to 2017 to verify our conjecture by quantifying the financial instability levels of the agents under different levels of borrowing capacity and how they affect one another during the period of the subprime mortgage crisis. Finally, the constraints of data collecting practice outside the United States in assessing borrowing capacity is addressed, accompanied by partial, yet compatible, results of selected Eurozone countries.

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Subprime mortgage crisis in the United States in 2007–2008: causes and consequences (part II)

Ekonomika ◽

10.15388/ekon.2015.1.5317 ◽

2015 ◽

Vol 94 (1) ◽

pp. 7-41 ◽

Cited By ~ 2

Author(s):

Vaidotas Pajarskas ◽

Aldona Jočienė

Keyword(s):

United States ◽

Federal Reserve ◽

Quantitative Research ◽

The United States ◽

Mortgage Market ◽

Subprime Mortgage ◽

Mortgage Crisis ◽

Subprime Mortgage Crisis ◽

The Government ◽

The Impact

This is the second part of the qualitative and quantitative research on the subprime mortgage crisis in the United States in 2007–2008. The main purpose of this research is to determine the factors and how they contributed to the subprime mortgage crisis, what their causal links and effects on the markets and the whole economy were, and to assess what actions could have been taken by the Federal Reserve and the Government in order to mitigate or prevent the consequences of the subprime mortgage crisis and the housing bubble. In order to obtain the results, the authors performed a qualitative analysis of the scientific literature on the course of events and their development that led to the subprime mortgage crisis and focused on insufficiently regulated home mortgage market expansion, the impact on subprime mortgage crisis of financial innovations and financial engineering, poorly evaluated systemic risks and policy undertaken by both the U.S. Government and the Federal Reserve before and after the crisis. The quantitative research focused on two main parts: firstly, the analysis of dependencies between the causes of subprime mortgage crisis and the consequences using the statistical and regression analysis; secondly, an alternative path the Government and the Federal Reserve could have taken in their policy actions, and the results they could have produced have been explored. The authors believe that the results of the research could give useful guidelines to the central bankers and government officials on how to make long-term decisions that can help in preparing for the financial distress, mitigating the consequences when the crisis strikes, accelerating the recovery and even preventing the crisis in the future.

Download Full-text