Cross country co-movement in equity markets after the US financial crisis

2016 ◽  
Vol 8 (2) ◽  
pp. 98-121 ◽  
Author(s):  
Amanjot Singh ◽  
Manjit Singh
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Correlation Coefficients ◽  
Equity Market ◽  
Content Type ◽  
Risk Return ◽  
The Us ◽  
The Usa ◽  
Cross Country ◽  
The Global Financial Crisis

Purpose This paper aims to attempt to capture the co-movement of the Indian equity market with some of the major economic giants such as the USA, Europe, Japan and China after the occurrence of global financial crisis in a multivariate framework. Apart from these cross-country co-movements, the study also captures an intertemporal risk-return relationship in the Indian equity market, considering the covariance of the Indian equity market with the other countries as well. Design/methodology/approach To account for dynamic correlation coefficients and risk-return dynamics, vector autoregressive (1) dynamic conditional correlation–asymmetric generalized autoregressive conditional heteroskedastic model in a multivariate framework and exponential generalized autoregressive conditional heteroskedastic model in mean with covariances as explanatory variables are used. For an in-depth analysis, Markov regime switching model and optimal hedging ratios and weights are also computed. The span of data ranges from August 10, 2010 to August 7, 2015, especially after the global financial crisis. Findings The Indian equity market is not completely decoupled from mature markets as well as emerging market (China), but the time-varying correlation coefficients are on a downward spree after the global financial crisis, except for the US market. The Indian and Chinese equity markets witness a highest level of correlation with each other, followed by the European, US and Japanese markets. Both the optimal portfolio hedge ratios and portfolio weights with two asset classes point out toward portfolio risk minimization through the combination of the Indian and US equity market stocks from a US investor viewpoint. A negative co-movement between the Indian and US market increases the conditional expected returns in the Indian equity market. There is an insignificant but a negative relationship between the expected risk and returns. Practical implications The study provides an insight to the international as well as domestic investors and supports the construction of cross-country portfolios and risk management especially after the occurrence of global financial crisis. Originality/value The present study contributes to the literature in three senses. First, the period relates to the events after the global financial crisis (2007-2009). Second, the study examines the co-movement of the Indian equity market with four major economic giants such as the USA, Europe, Japan and China in a multivariate framework. These economic giants are excessively following the easy money policies aftermath the financial crisis so as to wriggle out of deflationary phases. Finally, the study captures risk-return relationship in the Indian equity market, considering its covariance with the international markets.

Further evidence on idiosyncratic risk and REIT pricing: a cross-country analysis

2016 ◽  
Vol 29 (1) ◽  
pp. 34-58
Author(s):  
Lin Mi ◽  
Karen Benson ◽  
Robert Faff
Keyword(s):  
Global Financial Crisis ◽  
Statistical Significance ◽  
Idiosyncratic Risk ◽  
Content Type ◽  
Risk Return ◽  
Risk Variable ◽  
The Us ◽  
Country Analysis ◽  
Cross Country ◽  
The Global Financial Crisis

Purpose The purpose of this study is to provide new cross-country evidence on the relation between real estate investment trust (REIT) returns and idiosyncratic risk for samples of listed and unlisted REITs in the US and Australia. Design/methodology/approach Five alternative models with exponential GARCH enhancements were employed, in a Fama-MacBeth (1973) setup. The authors assess the statistical significance of the idiosyncratic risk variable and interpret the outcomes. Findings The results show that listed REITs in the US and Australia demonstrate a positive idiosyncratic risk-return linkage over the long period of January 1980-November 2013 and April 1994-December 2012, respectively. A further examination by sub-period reveals that this positive relation is only evident in the new REIT era (January 1993-September 2001), absent in the vintage era (before December 1992) and maturity era (November 2001-August 2008). The unlisted REITs in both countries show no relation with idiosyncratic risk. Further, the global financial crisis has no effect on the relation between idiosyncratic risk and REIT returns. Originality/value A key motivation of this paper stems from the mixed findings documented in the literature. Also very little research has been done on the idiosyncratic risk-REIT returns linkage in the Australian context. This study offers unique insights from comparisons: Australia vs the US; and listed vs unlisted REITs.

Sun, wind, rain and the sewer: outward form opportunities in a degraded landscape

2009 ◽  
Vol 13 (3-4) ◽  
pp. 285-294
Author(s):  
Timothy Stenson
Keyword(s):  
Carbon Dioxide ◽  
Financial Crisis ◽  
Housing Market ◽  
Global Financial Crisis ◽  
Good News ◽  
The Us ◽  
The Usa ◽  
And Performance ◽  
The Global Financial Crisis

The US housing market is infamous on at least two counts: implicated in the global financial crisis and notorious for its unsustainable consumption of resources and consequent discharge of carbon dioxide. Lately anything like good news regarding housing in the USA is scarce. However, the pause resulting from the collapse of the market, and increasing concern regarding building's agency in the environment, combine to provide an opportunity to reconsider the form and performance of housing. This may yet create an opening for design.

Housing markets and policy in the UK and the USA

2014 ◽  
Vol 7 (1) ◽  
pp. 129-144 ◽  
Author(s):  
Colin Jones ◽  
Harry W. Richardson
Keyword(s):  
Financial Crisis ◽  
Global Financial Crisis ◽  
Home Ownership ◽  
House Price ◽  
Housing Markets ◽  
Detailed Comparison ◽  
Exogenous Shock ◽  
Content Type ◽  
The Usa ◽  
The Global Financial Crisis

Purpose – This paper aims to examine how the exogenous shock of the global financial crisis has had a differential impact on the housing markets of the USA and UK. Design/methodology/approach – The paper begins by examining the nature and dynamics of the global financial crisis. It presents a detailed comparison of institutional and housing market characteristics in each country. A particular focus is the differences in mortgage funding and subprime lending trends over the decade leading up to the financial crisis. Findings – The analysis demonstrates the distinctiveness of the recent housing cycles and the geography of the downward price adjustments. Relative unemployment rates play a key role in these outcomes. Despite the different dynamics of the boom and bust, there is a common legacy in terms of the collapse of house building, repossessions/foreclosures and falling home ownership rates. The short-term policy responses by both governments addressed the same target issues in alternative ways but with different outcomes. Longer-term solutions are still being debated in both countries. Originality/value – Innovatory insights are provided by the comparison of the sub-national spatial pattern of the recent house price cycle in two countries.

Determinants of the global financial crisis recovery: an empirical assessment

2017 ◽  
Vol 44 (1) ◽  
pp. 36-46 ◽  
Author(s):  
Minh Quang Dao
Keyword(s):  
Financial Crisis ◽  
Financial Liberalization ◽  
Global Financial Crisis ◽  
Emerging Market ◽  
Gdp Growth ◽  
Content Type ◽  
Financial Depth ◽  
Crisis Recovery ◽  
Cross Country ◽  
The Global Financial Crisis

Purpose The purpose of this paper is to empirically assess the effect of the factors contributing to the recovery from this crisis in terms of national GDP growth among the G7, Asian7, and Latin American7 countries. Design/methodology/approach The author uses a multivariate regression analysis of the determinants of the global financial crisis recovery. Findings Based on data from 21 developed and developing emerging market economies the author found that good macroeconomic fundamentals together with more open financial policy, financial liberalization, financial depth, domestic performance, and favored global conditions do linearly influence national GDP growth. Over 85 percent of cross-country variations in GDP growth during the recovery phase of the global financial crisis can be explained by its linear dependency on pre-crisis national GDP growth, financial liberalization, financial depth, domestic performance, as well as interaction terms between various explanatory variables. Cross-country differences in national GDP growth also linearly depend on macroprudence and on favorable global conditions. Originality/value Results of such empirical examination may enable governments in developing countries devise resilience strategies that may serve as powerful tools for dealing with future global financial crises.

Intertemporal risk-return relationship in BRIC equity markets after the US financial crisis

2017 ◽  
Vol 59 (4) ◽  
pp. 547-570 ◽  
Author(s):  
Amanjot Singh ◽  
Manjit Singh
Keyword(s):  
Financial Crisis ◽  
Regime Switching ◽  
Global Financial Crisis ◽  
Equity Markets ◽  
Impulse Response Functions ◽  
Markov Regime Switching ◽  
Content Type ◽  
Risk Return ◽  
The Global Financial Crisis ◽  
Markov Regime Switching Model

PurposeThis paper aims to attempt to capture the intertemporal/time-varying risk–return relationship in the Brazil, Russia, India and China (BRIC) equity markets after the global financial crisis (2007-2009), i.e. during a relative calm period. There has been a significant increase in advanced economies’ equity allocations to the emerging markets ever since the financial crisis. So, the present study is an attempt to account for the said relationship, thereby justifying investments made by the international investors. MethodologyThe study uses non-linear models comprising asymmetric component generalised autoregressive conditional heteroskedastic model in mean (CGARCH-M) (1,1) model, generalised impulse response functions under vector autoregressive framework and Markov regime switching in mean and standard deviation model. The span of data ranges from 1 July 2009 to 31 December 2014. FindingsThe ACGARCH-M (1,1) model reports a positive and significant risk-return relationship in the Russian and Chinese equity markets only. There is leverage and volatility feedback effect in the Russian market because falling returns further increase conditional variance making the investors to expect a risk premium in the expected returns. The impulse responses indicate that for all of the BRIC markets, the ex-ante returns respond positively to a shock in the long-term risk component, whereas the response is negative to a shock in the short-term risk component. Finally, the Markov regime switching model confirms the existence of two regimes in all of the BRIC markets, namely, Bull and Bear regimes. Both the regimes exhibit negative relationship between risk and return. Practical implicationsIt is an imperative task to comprehend the relationship shared between risk and returns for an investor. The investors in the emerging economies should understand the risk-return dynamics well ahead of time so that the returns justify the investments made under riskier environment. Originality/valueThe present study contributes to the literature in three senses. First, the data relate to a period especially after the global financial crisis (2007-2009). Second, the study has used a relatively newer version of GARCH based model [ACGARCH-M (1,1) model], generalised impulse response functions and Markov regime switching model to account for the relationship between risk and return. Finally, the study provides an insightful understanding of the risk–return relationship in the most promising emerging markets group “BRIC nations”, making the study first of its kind in all the perspectives.

Inflation persistence and structural breaks

2016 ◽  
Vol 43 (6) ◽  
pp. 980-1005 ◽  
Author(s):  
Giorgio Canarella ◽  
Stephen M. Miller
Keyword(s):  
Monetary Policy ◽  
Financial Crisis ◽  
Structural Breaks ◽  
Global Financial Crisis ◽  
Structural Break ◽  
Mean Reversion ◽  
Inflation Persistence ◽  
Content Type ◽  
The Usa ◽  
The Global Financial Crisis

Purpose The purpose of this paper is to report on a sequential three-stage analysis of inflation persistence using monthly data from 11 inflation targeting (IT) countries and, for comparison, the USA, a non-IT country with a history of credible monetary policy. Design/methodology/approach First, the authors estimate inflation persistence in a rolling-window fractional-integration setting using the semiparametric estimator suggested by Phillips (2007). Second, the authors use tests for unknown structural breaks as a means to identify effects of the regime switch and the global financial crisis on inflation persistence. The authors use the sequences of estimated persistence measures from the first stage as dependent variables in the Bai and Perron (2003) structural break tests. Finally, the authors reapply the Phillips (2007) estimator to the subsamples defined by the breaks. Findings Four countries (Canada, Iceland, Mexico, and South Korea) experience a structural break in inflation persistence that coincide with the implementation of the IT regime, and three IT countries (Sweden, Switzerland, and the UK), as well as the USA experience a structural break in inflation persistence that coincides with the global financial crisis. Research limitations/implications The authors find that in most cases the estimates of inflation persistence switch from mean-reversion nonstationarity to mean-reversion stationarity. Practical implications Monetary policy implications differ between pre- and post-global financial crisis. Social implications Global financial crisis affected the persistence of inflation rates. Originality/value First paper to consider the effect of the global financial crisis on inflation persistence.

scholarly journals The mechanisms linking the finance-growth relationship in view of the financial crisis: an empirical investigation of the EU countries

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Dimitrios Asteriou ◽  
Konstantinos Spanos
Keyword(s):  
Economic Growth ◽  
Financial Crisis ◽  
Stock Market ◽  
Financial Development ◽  
Banking Sector ◽  
Global Financial Crisis ◽  
Equity Market ◽  
Private Debt ◽  
Content Type ◽  
The Global Financial Crisis

PurposeThe paper aims to explore the mechanisms linking the impact of financial development on economic growth and focuses on the long-term post-global financial crisis.Design/methodology/approachThe study employs panel data for twenty-five European Union countries over the period 1995–2017. Principal Component Analysis is employed to produce two aggregate indices, namely financial banking sector development and stock market sector development. The empirical analysis is based on estimates through the autoregressive distributed lag (ARDL) method.FindingsThe results suggest that the outbreak of the crisis has led to a disruption of the positive finance-growth relationship, and the banking sector dominates in this adverse effect. The foreknowledge of the current study is that the linking mechanisms of the negative impact of financial development on economic growth, ten years after the global financial crisis, are household debt, private debt, and non-performing loans for the banking sector, while for the equity market this is the case through savings. Interestingly, the results reveal that unemployment increase excessively the borrowers' debt level and then the non-performing loans.Research limitations/implicationsAn implication is that the increase of credit supply and any monetary expansion along with lack of regulatory control and monitoring can lead banks to a higher risk exposure through household and private debt as well as non-performing loans. Besides, the higher levels of unemployment rates call attention for the trade-off between prudential regulation on the supply of loans and economic activity, since higher unemployment affect the non-performing loans and, as a consequence discourage the demand, increase precautionary savings, and cancel or postpone investment decisions, thus, affecting the equity market.Originality/valueThe paper provides useful insights to economists and policymakers who are interested in understanding the weakness of banking and stock market sectors to promote economic growth for a long time after the global financial crisis.

scholarly journals Changes in stock markets interdependencies as a result of the global financial crisis: Empirical investigation on the CEE region

2011 ◽  
Vol 58 (4) ◽  
pp. 525-543 ◽  
Author(s):  
Cristiana Tudor
Keyword(s):  
Financial Crisis ◽  
Stock Markets ◽  
Global Financial Crisis ◽  
Stock Exchange ◽  
Leading Role ◽  
The Us ◽  
The Usa ◽  
The Global Financial Crisis ◽  
Stock Indexes ◽  
European Stock Markets

This paper investigates causal relationships and short-term interaction mechanisms among six Central and Eastern European stock markets and the USA stock exchange, while paying special consideration to the effects of the 2007-2009 global financial crisis. We employ daily observations for the six CEE stock indexes and also for the US market covering the period January 2006-March 2009, which is subsequently divided into two sub-periods corresponding to the pre-crisis and crisis period. The study reveals that the relationships among CEE stock markets are time varying. While before the crisis stock market linkages are limited, we find that during crisis these interactions become significantly stronger. Our results further suggest that the potential for diversifying risk by investing in different CEE markets is limited during financial turmoil. Other findings reveal the leading role of the Russian market in the CEE region before the crisis. Also, before the crisis CEE markets were significantly influenced by innovations in the USA market, thus explaining why they were affected heavily by the crisis, which has managed to spread immediately in the region.

Global financial crisis after ten years: a review of the causes and regulatory reactions

2019 ◽  
Vol 45 (7) ◽  
pp. 904-924 ◽  
Author(s):  
Ashrafee Tanvir Hossain ◽  
Lawrence Kryzanowski
Keyword(s):  
Financial Crisis ◽  
Design Methodology ◽  
Review Paper ◽  
Global Financial Crisis ◽  
Relevant Literature ◽  
Main Reaction ◽  
Housing Crisis ◽  
Content Type ◽  
The Usa ◽  
The Global Financial Crisis

Purpose The purpose of this paper is to review the relevant literature on the causes of and regulatory reactions to the financial crisis of the last decade, popularly known as the “Global Financial Crisis (GFC)” or the “Housing Crisis” in the USA. Design/methodology/approach This review primarily focuses on the four main causes of the crisis, namely, excessive household leverage, securitization, corporate governance and credit ratings. The main reaction vis-à-vis recovery measures taken by most governments were quantitative easing (QE), bailouts and more stringent regulations of banks, though the discussion mainly focuses on QE. Findings In this paper, the authors summarize the literature on the causes and regulatory reactions to the GFC and propose future avenues of research for various topics. Originality/value Research on the GFC spans multiple disciplines as well as multiple facets of financial economics. A review paper such as this should help future researchers in generating ideas and gathering information for their research. Given that no review uncovers all worthy papers, the authors apologize in advance to the authors of any papers that the authors have inadvertently not reviewed in this paper.

Oil volatility index and Chinese stock markets during financial crisis: a time-varying perspective

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Panayiotis Tzeremes
Keyword(s):  
Financial Crisis ◽  
Sovereign Debt ◽  
Global Financial Crisis ◽  
Debt Crisis ◽  
Subprime Crisis ◽  
Content Type ◽  
Volatility Index ◽  
The Us ◽  
Three Stages ◽  
The Global Financial Crisis

Purpose This study aims to examine the interconnection among the oil volatility index (OVX) and the Chinese stock markets (CSM) during the financial crisis over the period June 1, 2007 to June 26, 2012. Design/methodology/approach Applying the time-varying Granger causality test, this paper conducts an exhaustive analysis of the OVX and the CSMs during the financial crisis. In particular, the financial crisis is classified in three stages, namely, the US subprime crisis, the global financial crisis and the sovereign debt crisis. Findings Briefly, the findings indicate almost a neutral relationship between the OVX and the CSMs during the entire financial crisis, the US subprime crisis and the global financial crisis. Finally, this paper has found a positive relationship between the OVX and the CSMs during the sovereign debt crisis. Practical implications This outcome clearly suggests that Chinese investors have to disregard uncertain information. In addition, policymakers can ameliorate the willingness of market investors in the CSM and further deepen the market-oriented reform of China’s domestic oil prices. Originality/value The innovative combination of these two strands, the OVX and the three stages of the financial crisis, is empirically examined in the study and this paper finds a non-linear linkage between the OVX and CSMs.

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