The Financial Crisis

2019 ◽  
pp. 1-12
Author(s):  
Alan N. Rechtschaffen
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Financial Markets ◽  
Economic Impact ◽  
Free Fall ◽  
Regulatory Framework ◽  
Subprime Lending ◽  
Crisis Period ◽  
The U.S ◽  
Trump Administration

This chapter discusses the origins of the 2007 financial crisis, subprime lending, and government-sponsored entities. It argues that the events driving financial markets to the precipice of collapse during the global financial meltdown gave rise to a regulatory framework that may have been a rational response to a market in free fall, but need to be reassessed in an era of recovery. In 2018, the U.S. economy may be, by many measures, viewed as wholly recovered from the economic impact of the crisis. The stock market is trading at record highs, having erased all the losses of the crisis period and then some. With this recovery, the Trump administration seeks to restrain the regulatory burden imposed during the crisis.

scholarly journals Does American Stock Market React Differently to Expected Versus Surprise Ratings During Crisis Period? The Case of the 2008 Worldwide Financial Crisis

2018 ◽  
Vol 8 (3) ◽  
pp. 108
Author(s):  
Abdelkader Boudriga ◽  
Dorsaf Azouz Ghachem
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Financial Markets ◽  
Market Reaction ◽  
Positive Impact ◽  
Good News ◽  
Crisis Period ◽  
Rating Agencies

We study the rating impact on American stock market during crisis period by distinguishing expected versus surprise announcements. If unexpected ratings generate stronger reaction than expected ones, which means that rating agencies maintain credibility and influence on investors’ decisions. Otherwise, they have to revise their methodologies and procedures in order to recover place on financial markets. Results show that during crisis period market reaction to bad and neutral expected rating announcements is negative and more accentuated than reaction to surprise announcements; on contrary to good news that produce a short positive impact when they are unexpected and are not perceived by the market otherwise. Results reflect once more market distrust to rating agencies and faith loss towards announcements.

scholarly journals Who Moves the Malaysian Stock Market— the U.S. or Japan?: Empirical Evidence from the Pre-, During, and Post-1997 Asian Financial Crisis

2006 ◽  
Vol 8 (3) ◽  
pp. 367 ◽  
Author(s):  
Rosylin Mohd. Yusof ◽  
M. Shabri Abd. Majid
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Stock Markets ◽  
Bilateral Trade ◽  
Asian Financial Crisis ◽  
Japanese Economy ◽  
Impulse Response Functions ◽  
Crisis Period ◽  
Long Run ◽  
The U.S

This paper examines long run co-movements between Malaysian stock market and the two largest stock markets in the world: the U.S. and Japan. By employing time-series analysis, i.e., cointegration, variance decompositions, and impulse response functions, the paper seeks to investigate which market actually leads the Malaysian stock market before, during, and after the 1997 Asian financial crisis periods. The results indicate that there is a co-movement of these markets only in the post crisis period. The Japanese stock market is found to significantly move the Malaysian stock market compared to U.S. stock market for the post-crisis period. At the same time, there seems to be a growing proportion of bilateral trade between Malaysia and Japan during the mentioned period. This finding seems to be consistent with the view that the stronger the bilateral trade ties between two countries, the higher the degree of co-movements (Masih and Masih 1999; Bracker et al. 1999; Pretorius 2002; Ibrahim 2003; Kearney and Lucey 2004). Our finding implies that the opportunities of gaining abnormal profits through investment diversification during the post-crisis period in the Malaysian and Japanese stock markets are diminishing as the markets move towards a greater integration. This further implies that any development in the Japanese economy has to be taken into consideration by the Malaysian government in designing policies pertaining to Malaysian stock market.

scholarly journals Forecasting Term Structure of Interest Rates in Japan

2019 ◽  
Vol 7 (3) ◽  
pp. 39 ◽  
Author(s):  
Ishii
Keyword(s):  
Financial Crisis ◽  
Interest Rates ◽  
Term Structure ◽  
Bond Markets ◽  
Forecast Horizon ◽  
Forecast Performance ◽  
Crisis Period ◽  
Long Period ◽  
The U.S ◽  
Dns Model

In this paper, we examined and compared the forecast performances of the dynamic Nelson–Siegel (DNS), dynamic Nelson–Siegel–Svensson (DNSS), and arbitrage-free Nelson–Siegel (AFNS) models after the financial crisis period. The best model for the forecast performance is the DNSS model in the middle and long periods. The AFNS is inferior to the DNS model for long-period forecasting. In U.S. bond markets, AFNS is shown to be superior to DNS in the U.S. However, for Japanese data, there is no evidence that the AFNS is superior to the DNS model in the long forecast horizon.

Measuring Dependence Between the USA and the Asian Economies: A Time-varying Copula Approach

2019 ◽  
Vol 20 (4) ◽  
pp. 962-980 ◽  
Author(s):  
Shegorika Rajwani ◽  
Dilip Kumar
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Financial Markets ◽  
Stock Markets ◽  
Global Financial Crisis ◽  
Tail Dependence ◽  
Time Varying ◽  
The Us ◽  
Asian Economies ◽  
Copula Approach

During the past few years, many of the financial markets have gone through devastating effects due to the crisis in one or the other economy of the world. The recent global financial crisis has triggered dramatic movements in various stock markets which may arise from interdependence or contagion between the markets. This article attempts to measure the contagion between the equity markets of Asia and the US stock market. The countries considered in the Asian group are China, India, Indonesia, South Korea, Taiwan, Hong Kong, Malaysia and Japan. Most of the Asian economies have experienced drastic higher volatility and uncertainty in the financial markets. If the markets are contagious, then the investors will be unable to reap benefits through international diversification of the portfolio. In such a case, the policymakers will further frame policies so that they can insulate themselves from inflicting heavy damage from various crises. To achieve our goal, we make use of the time-varying copula approach which helps us to study the joint behaviour of the series based on their marginal distribution. Time-varying copula approach can also capture the non-linear dependence in the series and exhibits a rich pattern of tail behaviour. Our findings support the contagion between the Asian stock markets and the US stock market during the global financial crisis. This article also highlights that the increased tail dependence is an important factor for the contagion between the Asian stock markets and the US market.

International Trade Relations and the Contagious Effects of the Asian Financial Crisis

2000 ◽  
Vol 03 (03) ◽  
pp. 367-399 ◽  
Author(s):  
Chunchi Wu
Keyword(s):  
Financial Crisis ◽  
Financial Markets ◽  
East Asian ◽  
Asian Financial Crisis ◽  
Trade Relations ◽  
Fundamental Causes ◽  
Asian Economies ◽  
Trade Relationship ◽  
The Impact ◽  
The U.S

This paper examines the trade relationship among Pacific Rim Asian economies and the U.S. with an attempt at understanding the fundamental causes for the contagious effects of the Asian financial crisis. East Asian economies trade extensively among themselves and with the U.S. This great dependence on foreign trade and investments has considerably increased the instability of the economies and financial markets in this region. It is found that the impact of the financial crisis on a domestic economy is positively correlated with its trade relationship with foreign economies. The importance of the trade relationship is manifested in the financial markets. Results show that the returns and volatility of a stock market are significantly influenced by the markets of its major trading partners. Also, foreign exchange markets often significantly interact with stock markets, especially following the Asian financial crisis. Furthermore, the Japanese and Hong Kong markets, instead of the U.S. market, had a dominating effect on East Asian financial markets during the period of the financial crisis.

The Impact of Government Intervention in Banks on Corporate Borrowers’ Stock Returns

2013 ◽  
Vol 48 (5) ◽  
pp. 1635-1662 ◽  
Author(s):  
Lars Norden ◽  
Peter Roosenboom ◽  
Teng Wang
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Stock Returns ◽  
Banking Sector ◽  
Positive Impact ◽  
Support Programs ◽  
Government Interventions ◽  
Stock Market Performance ◽  
The Impact ◽  
The U.S

AbstractWe investigate whether and how government interventions in the U.S. banking sector influence the stock market performance of corporate borrowers during the financial crisis of 2007–2009. We measure firms’ exposures to government interventions with an intervention score that is based on combined information on the firms’ structure of bank relationships and their banks’ participation in government capital support programs. We find that government capital infusions in banks have a significantly positive impact on borrowing firms’ stock returns. The effect is more pronounced for riskier and bank-dependent firms and for those that borrow from banks that are less capitalized and smaller.

scholarly journals The Global Financial Crisis, Inflation Rate And Stock Market Returns In Kenya

2017 ◽  
Vol 13 (19) ◽  
pp. 191
Author(s):  
Donald A. Otieno ◽  
Rose W. Ngugi ◽  
Nelson H. W. Wawire
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Regression Model ◽  
Inflation Rate ◽  
Global Financial Crisis ◽  
Moderating Effect ◽  
Market Returns ◽  
Stock Market Returns ◽  
Crisis Period ◽  
Product Term

The moderating effect of events such as the 2008 Global Financial Crisis (GFC) on the relation between stock market returns and macroeconomic variables has attracted very little attention. This study investigates the extent to which the 2008 GFC moderated the relationship between inflation rate and stock market returns. The study uses month-onmonth inflation rate and year-on-year inflation rate from 1st January 1993 to 31st December 2015 and divides the sample data into pre-crisis period (from 1st January 1993 to 31st December 2007); crisis period (from 1st January 2008 to 30th June 2009); and post-crisis period (from 1st July 2009 to 31st December 2015). It uses a product-term regression model instead of the most widely applied additive regression model. Results indicate that a unit increase in the both measures of inflation rate had significant depressing effects on stock market returns after the crisis compared to before the crisis. Likewise, the results reveal that average stock market returns were significantly higher after the crisis compared to before the crisis at low rather than medium or high values of the two measures of inflation rate. These results suggest that the Kenyan stock market is highly sensitive to variations in inflation rate, especially as it emerges from a financial or political turmoil. This study is empirically innovative in the sense that it is the first to examine the moderating effect of the 2008 GFC on the relation between inflation rate and stock market returns in Kenya using a product-term model.

scholarly journals Contagion of the shareholder market: cases of Colombia, México, Perú, Chile and Argentina

2019 ◽  
Vol 18 ((1)) ◽  
Author(s):  
Marcos Vera Leyton
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Time Window ◽  
Sum Of Squares ◽  
Conditional Correlation ◽  
Cumulative Sum ◽  
Crisis Period ◽  
Dynamic Conditional Correlation ◽  
Highly Sensitive ◽  
Before And After

This document study the existence of financial crisis contagion, it defined like the transmission of the shocks between countries, which translates in increasing in the correlation anything beyond or fundamental link, taking as a source of contagion by EEUU, Brasil, and analyzing Mexico, Colombia, Peru, Chile and Argentina like “Infected” countries, for the period covered between July 3 of 2001, date of unification of the Colombia Stock Market, to July 3 of 2010. To identify crisis period, and to evoid volatility overestimation, it used the algorithm iterative cumulative sum of squares ICCS, developed by Inclan y Tiao (1994), additionally calculated the dynamic conditional correlation (DCC) Engle Model (2002). The document includes a review of several studies, concepts, and transmission (Contagion) methodologies, and it constitutes one of the few studies that includes Colombia like analysis source.  So this study verifies the existence of contagion in the countries studies, except Argentina, but warns that the measure of impact that a crisis in a given country has over other countries is highly sensitive to the way we choose the time window before and after the crisis.

scholarly journals A Study Of U.S. Stock Market Volatility, Fall 2008

2011 ◽  
Vol 7 (11) ◽  
Author(s):  
Ron Christner
Keyword(s):  
Stock Market ◽  
Financial Markets ◽  
Life Span ◽  
Relative Magnitude ◽  
Market Volatility ◽  
Stock Market Volatility ◽  
Font Size ◽  
Bear Market ◽  
Stock Indexes ◽  
The U.S

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt;"><span style="font-family: &quot;Times New Roman&quot;,&quot;serif&quot;; color: black;"><span style="font-size: x-small;">This is a market volatility study utilizing three measures of assessing volatility in the U.S stock markets prior to and after the month of September 2008 using three proxies. The first is the VIX index, the CBOE options volatility measure. The next two are bearish, or short position strategy, ETF&rsquo;s based on stock indexes but designed to reflect and benefit from stock market movements in the downward direction. They are the Power Shares index, symbol SDS, and the Rydex Index, symbol RMS. This research evaluates and analyzes weekly movements in the three volatility variables mentioned above for a period of the last eight months of 2008. This includes the four months prior to and the four months after the beginning of September 2008. Specifically, the relative magnitude, volatility and degree of correlation between the three variables will be examined and compared to the movements in NYSE, NASDAQ and S &amp; P stock indexes. The life span and volume of trading, one measure of liquidity, in each of the three variables will also be evaluated. Part of the analysis, and conclusions, will involve analyzing how similar or dissimilar the three behave and whether one may be a better indicator of current<span style="mso-spacerun: yes;">&nbsp; </span>or future volatility in the stock market, or financial markets in general and how effective the bear market ETF&rsquo;s might be as hedging vehicles in a down market.</span></span></p>

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