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A Comparison of Global Stock Market before and after the 2007-2009 Global Financial Crisis

Dorota Witkowska 1Jennifer P. Foo 2

1. Szkoła Główna Gospodarstwa Wiejskiego (SGGW), Nowoursynowska 166, Warszawa 02-787, Poland
2. Stetson University (SU), 421 N. Woodland Blvd, Deland, FL, Orlando, FL 32723, United States

Abstract

The Financial Crisis of 2007-2009 plunged countries into the Great Recession and brought global stock markets into focus. The global contagion has a major impact on global stock markets, with the U.S. DJIA falling to 6,547.05 on March 9, 2009 from a highest of 14,164.53 on October 9, 2007, a loss of more than 54%. Other global stock markets also had precipitous drop in the aftermath of the financial crisis. However, some global markets have recovered while others have not. This paper looks at how global markets compared in their recovery.

In our study we apply statistical inference to verify the hypotheses that the recovery of stock markets at selected diverse stock exchanges around the world are disproportionate. We can describe the conditions of the stock market recovery in our study as represented by the main stock indexes, statistically significant changes of returns (measured by logarithmic rates of return), and risk (measured by variance). We employ time series of stock indexes from national capital markets as well as emerging and developing countries separately to compare stock market recovery in both markets.

Therefore we distinguish the pre-crisis period as the one before Lehman Brothers Holdings Inc. declared bankruptcy - up to September 15, 2008. We considered different lengths of analyzed periods: the first one from January, 1, 2005 to May, 31, 2012 and in this sample period with September 15, 2008 as the dividing date into two equal-length sub-periods, and the second one containing more present observations until the end of the whole period of March, 31, 2013.

 

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Related papers

Presentation: Oral at Current Economic and Social Topics CEST2013, Symposium on Financial Market Analysis, by Dorota Witkowska
See On-line Journal of Current Economic and Social Topics CEST2013

Submitted: 2013-05-18 19:08
Revised:   2013-05-18 19:09