scholarly journals The financial crisis and securitization

2020 ◽  
Vol 1 (1) ◽  
pp. 37-48
Author(s):  
Ewa Szabłowska
Keyword(s):  
Financial Crisis ◽  
Financial Markets ◽  
Financial Market ◽  
Subprime Crisis ◽  
Subprime Mortgage ◽  
Mortgage Crisis ◽  
Indirect Impact ◽  
The Impact ◽  
Near Future ◽  
The U.S

Securitization means the change of non-liquid assets into securities. This topic has become more popular, mainly due to the U.S. subprime mortgage crisis. In this article, an analysis is given of the current situation in financial markets and the changes, which were implemented from the first days of subprime crisis. Also mentioned is the impact the crisis has had on securitization development. Part of the article is devoted to the situation on the Polish financial market. It is quite a new market and it is susceptible to such crises. The Article presents the part played by securitization in the Polish financial market and the circumstances for its growth in the near future. It also covers the latest information related to financial market regulations, which could have direct or indirect impact on the quantity and value of securitization transactions.

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.

International diversification during financial crises

2018 ◽  
Vol 44 (12) ◽  
pp. 1434-1445
Author(s):  
Chu-Sheng Tai
Keyword(s):  
Financial Crisis ◽  
Stock Market ◽  
Financial Markets ◽  
Financial Crises ◽  
International Diversification ◽  
Subprime Crisis ◽  
Content Type ◽  
Empirical Results ◽  
The Impact ◽  
Dot Com

Purpose The purpose of this paper is to provide empirical evidence on how 1999–2001 dot-com crisis and 2007–2009 subprime crisis affect the gains from international diversification from the perspective of US investors. Design/methodology/approach A conditional international CAPM with asymmetric multivariate GARCH-M specification is used to estimate international diversification gains. Findings The authors find that over the entire sample period, the average gains from international diversification is statistically significant and about 1.253 percent per year. During the subprime crisis period, the average gains decreases to about 0.567 percent per year, but it increases to 2.829 percent per year during the dot-com crisis. Research limitations/implications These research findings although confirm the conjectures that international financial turmoil tends to increase the co-movements among global financial markets, are in contrast to the conjectures that international diversification does not work during the financial crisis as evidence from the dot-com crisis. Therefore, future research on international diversification should not just focus on the correlation among international financial markets and should adopt a fully parameterized asset pricing model to study this research topic. Practical implications Given the empirical results found in this paper that international diversification gains may be decreasing or increasing during the financial crisis, as long as investors are not able to predict international financial crises, it is the average gains from international diversification over the longer periods that should encourage investors to diversify, regardless of potentially lower benefits over the shorter periods of time. Originality/value The major value of this paper is that although the increase in the conditional correlation during the financial turmoil is consistent with previous studies, the empirical results clearly show that the impact of a financial crisis on the gains from international diversification cannot be solely determined by the correlation between domestic and world stock market returns since the gains also depend on the unsystematic risk from the domestic stock market. Consequently, it is premature for previous studies to conclude that the gain from international diversification is diminishing due to an increasing correlation among international stock markets during the financial crisis.

scholarly journals How COVID-19 impacts the U.S. economy and predictions about the future

2020 ◽  
Vol 218 ◽  
pp. 04007
Author(s):  
Fangze Tian
Keyword(s):  
Financial Market ◽  
Current Crisis ◽  
Daily Lives ◽  
Subprime Mortgage ◽  
Long Run ◽  
Mortgage Crisis ◽  
The Future ◽  
Flexible Processes ◽  
Entire Economy ◽  
The U.S

The spread of COVID-19 is one of the most impactful global events in recent years. It has destroyed the U.S. economy and financial market. In just several months, the stock market experienced major fluctuations, the entire economy has basically stopped, and the unemployment rate peaked. Its severity even penetrated people’s daily lives; many are not getting basic requirements needed for survival. As cases increase daily, more and more are concerned with how the future will look like and what this pandemic will do to the economy in the long run. Faced with many uncertainties in macroeconomic trends and the continuous spreading of the virus, I have compared this current crisis with the subprime mortgage crisis in 2008. With a goal to reasonably forecast future developments of the U.S. economy, from both micro and macro perspectives, financial market trends and government actions have been analyzed. Specifically, the two events’ causes, essences, policies’ effectiveness, and other factors have been evaluated and suggestions in adjusting government policies have also been made. Unlike the 2008 crisis, this crisis will require longer, more complex, and more flexible processes and regulations to recover, and citizens should be prepared for this slow recovery. But overall, a promising outlook for the U.S. economy still stands in the long-run.

scholarly journals The Subprime Mortgage Lending Collapse: Should We Have Seen It Coming?

2011 ◽  
Vol 6 (12) ◽  
Author(s):  
Jared E. Hojnacki ◽  
Richard A. Shick
Keyword(s):  
Financial Markets ◽  
Financial Institutions ◽  
Mortgage Lending ◽  
Housing Values ◽  
Current Crisis ◽  
Rescue Operation ◽  
Subprime Mortgage ◽  
The Great Depression ◽  
Mortgage Crisis ◽  
The U.S

The subprime mortgage lending crisis and the decline in housing values has profoundly affected the worlds’ financial markets.  Financial institutions have ceased to exist, others have come under the U.S. government’s control, the future survival of others has been threatened and the U.S. government is proposing the greatest financial rescue operation since the Great Depression.  Profound changes in the financial markets have occurred and the markets will never be quite the same again.  This paper presents the argument that this collapse should have been foreseen by tracing and comparing the development and decline in the subprime auto lending market in the 1990’s to the development and decline of the subprime mortgage lending market.   While the effects of the subprime mortgage crisis are greater and farther reaching than those of the subprime auto lending market, there is no question that the similarities are plain to be seen and that the current crisis should come as no surprise.

Normative dimensions of central banking: How the guardians of financial markets affect justice

2017 ◽  
Author(s):  
Peter Dietsch
Keyword(s):  
Monetary Policy ◽  
Financial Crisis ◽  
Financial Markets ◽  
Central Banking ◽  
Democratic Legitimacy ◽  
Policy Agenda ◽  
Theory Of Justice ◽  
Introductory Section ◽  
The Impact

Monetary policy, and the response it elicits from financial markets, raises normative questions. This chapter, building on an introductory section on the objectives and instruments of monetary policy, analyzes two such questions. First, it assesses the impact of monetary policy on inequality and argues that the unconventional policies adopted in the wake of the financial crisis exacerbate inequalities in income and wealth. Depending on the theory of justice one holds, this impact is problematic. Should monetary policy be sensitive to inequalities and, if so, how? Second, the chapter argues that the leverage that financial markets have today over the monetary policy agenda undermines democratic legitimacy.

scholarly journals The impact of the financial crisis on earnings management: Empirical evidence from Italian and Spanish listed companies

2019 ◽  
Vol 16 (2) ◽  
pp. 121-130 ◽  
Author(s):  
Francesco De Luca ◽  
Francesco Paolone
Keyword(s):  
Financial Crisis ◽  
Financial Markets ◽  
Performance Indicators ◽  
Listed Companies ◽  
Publicly Traded ◽  
Publicly Traded Companies ◽  
Time Period ◽  
Security Offerings ◽  
The Impact ◽  
Giving Bad News

Our study adopts a reliable and widely acknowledged model to detect accounts manipulation in order to assess the impact of the financial crisis on Italian and Spanish listed companies’ propensity to manage their earnings. The analysis is conducted on 565 publicly traded companies on the Italian and Spanish financial markets during the time period 2005-2013. We find a lower propensity to manipulate earnings in both countries during the pre-crisis period (2005-2008) as suggested by a decrease in the number of high-risk manipulators until 2008 included. With the spread of the financial crisis, companies become more manipulators. We believe that the reason for this is to avoid giving bad news to markets, investors, and lenders after that the crisis may have impacted too negatively on firms’ performance indicators and financial equilibrium. Our empirical results provide various implications for further studies related to managements’ incentives concurrently with security offerings.

scholarly journals SUBPRIME MORTGAGE CRISIS IN THE UNITED STATES IN 2007–2008: CAUSES AND CONSEQUENCES (PART I)

Ekonomika ◽  
2015 ◽  
Vol 93 (4) ◽  
pp. 85-118 ◽  
Author(s):  
Vaidotas Pajarskas ◽  
Aldona Jočienė
Keyword(s):  
United States ◽  
Federal Reserve ◽  
The United States ◽  
Mortgage Market ◽  
Subprime Mortgage ◽  
Market Expansion ◽  
Mortgage Crisis ◽  
Subprime Mortgage Crisis ◽  
The Government ◽  
The Impact

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.

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.

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