Journal of Finance and Accounting

| Peer-Reviewed |

Impact of the Global Crisis of the Subprime on the Current Stock Price

Received: 18 February 2016    Accepted: 25 February 2016    Published: 10 March 2016
Views:       Downloads:

Share This Article

Abstract

The present study is therefore based on the determination of the behavior of stock markets during the period of the subprime crisis via the phenomenon of integration and the contagion, the variable used in this study is nothing other than the stock market index. The databases used in this study are daily data of the price of stock indices of 5 developed markets and 5 emerging markets. They have been extracted from the base of the site "Yahoo Finance and economists." These indices cover the period from January 2007 to June 2014, which gives us 2000 Comments by market. The result shows well the significant increase of the coefficient of correlation between stock markets: American, French, Germany and Great Britain during the period of the crisis. We interpret this increase as a proof of the contagion. In the second place, it has tried to apply the theory of cointegration. The results of the cointegration tests show the existence of three cointegrating relationships to the more between the stock markets. The existence of cointegration relationship represents a proof of the contagion and the integration of stock markets. In the third place, it has tried to apply the criterion of the causality between the indices of actions. The result of this test demonstrates the existence of several links of causality between these indices, which confirms the importance of the contagion effect during the crisis.

DOI 10.11648/j.jfa.20160402.12
Published in Journal of Finance and Accounting (Volume 4, Issue 2, March 2016)
Page(s) 33-46
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Financial Markets, Integration, Contagion, Causality, Crisis

References
[1] Agliette, M., (2008), "the crisis, why has it come to this? How to get out of it?" Editions Michalon, Paris, Pp. 21-58.
[2] Arvai, Zsofia and János Vincze, Janos (2000). "Financial Crises in transition countries: Models and facts" MNB Working Paper, (2000).
[3] Baig, T., Goldfajn, I., 1998. Financial market contagion in the asian crisis, IMF Working Paper, WP/98/155.
[4] Bekaert, G. Harvey, Q. C. and Ng, A. (2003), "Market Integration and contagion", NBER Working Paper, no. 9510.
[5] Billio, M., Pelizzon, L., 2003. Contagion and interdependence in stock markets: Have they been misdiagnosed? Journal of Economics and Business, 55, 405-426.
[6] Boyer, Robert, Dehove, Mario and PLIHON, Dominique (2004). "The financial crises", Council of Economic Analysis, 50, (2OO4).
[7] Calvo, S., Reinhart, C., 1996. Capital flows to emerging countries: Is there evidence of contagion effects?, dans Calvo G., Goldestein M. et Hochreiter E. (éd.), Private capital flows to emerging markets, Institute for International Economics.
[8] Calvo, Guillermo (1999). "Contagion in Emerging Markets: When Wall Street is a Carrier", University of Maryland, (1999).
[9] Cartabinis, André (2004). "The triggering of the foreign exchange crises: what have we learned since ten years? International Economics, 97, (2004), 43p.
[10] Caporale, G. M., Cipollini, A., Spagnolo, N., 2005. Testing for contagion: a conditional correlation analysis, Journal of Empirical Finance, 12, 476-489.
[11] Cerra, V., Saxena, S., 2000. Contagion, monsoons and domestic turmoil in Indonesia: A case study in the Asian currency crises, IMF Working Paper, WP/00/60.
[12] Climent, F., Meneu, V., 2003. Has 1997 Asian crisis increased information flows between international markets, International Review of Economics and Finance, 12, 111-143.
[13] Dehove, Mario (2003). "Financial Crises two or three things that we know of them", Working Document, Council of Economic Analysis, (2003).
[14] Dungey, M., Zhumabekova, D., 2001. Testing for contagion using correlation: some words of caution, Pacific Basin Working Paper Series, n° PB01-09.
[15] Dornbuch, Rudiger and Chul Park Yung and Claessens Stijn (2000). "Contagion: how it spreads and how bed can be stopped", forthcoming World Bank Research observe, (2000).
[16] Engel, R. F., Granger, C. W. J., 1987. Co-integration and error correction representation, estimation and testing, Econometrica, 55, 251-276.
[17] Escribano, A., Pfann, A. G., 1998. Non-linear error correction, asymmetric adjustment and cointegration, Economic Modelling, 15, 197-216.
[18] Favero, C. A., Giavazzi, F., 2000. Looking for contagion: Evidence from the ERM, NBER Working Paper Series, 7797.
[19] Forbes, K., Rigobon, R., 2001. Contagion in Latin America: Definition, Measurement, and Policy Implications, Mit-Sloan school of management and NBER, January 17.
[20] Forbes, K., Rigobon, R., 2002. No contagion, only interdependence: Measuring stock market co-movements, Journal of Finance, 57 (5), 2223-2261.
[21] Gerlach, S., Smets, F., 1995. Contagious Speculative Attacks, European Journal of Political Economy, 11, 45-63.
[22] Glick, R., Rose, A. K., 1999. Contagion and trade - Why are currency crises regional, Journal of International Money and Finance, 18, 603-617.
[23] Glick, Reuven and pink, Andrew (1999). "Contagion and trade: Why are currency crises Regional? logging of International Money and Finance, 18, (1999), 14 p.
[24] Gilmore, C. G. and McManus, G. M. (2002), "international portfolio diversification: US and Central European equity markets", Emerging Markets Review, Vol. 3, Pp. 69-83
[25] Goldestein, I., Pauzner, A., 2004. Contagion of self-fulfilling financial crises due to diversification of investment portfolios, Journal of Economic Theory, 119, 151-183.
[26] Goldestein, M., 1998. The Asian financial crises: causes, cures and systemic implication, Policy Analysis in International Economics, Institute for International Economics, p.55.
[27] Granger, C. W. J., Lee, T. H., 1989. Investigation of production, sales and non-symmetric error correction models, Journal of Applied Econometrics, 4, 145-159.
[28] Gravelle, T., Kichian, M., Morley, J., 2005. Detecting shift contagion in currency and bond markets, Journal of International Economics.
[29] IMF, (2008 a), "Global Financial Stability Report, containing systemic risks and restoring financial soundness," MFIS Multimedia Services Division, April.
[30] IMF, (2008 b) "The global crisis and sub-Saharan Africa", African department.
[31] IMF, (2008 c), "the prospects for the world economy: financial turmoil, slowdowns and Adjustments", November.
[32] IMF, (2009 a) "The prospects for the world economy: Update of the main Projections", January.
[33] IMF, (2009 b), "Report on financial stability in the world-news of the markets", January.
[34] Instability of the International Financial System (by OLLIVIER DAVANNE), the French documentation [1997].
[35] Irwin, Gregor. And vines David (1999). "A Krugman - Dooley - Sachs third generation model of the Asian financial crisis," Economic and Social Research Council (ESRC) - Global Economic Institutions, Working Paper Series, 46, (1999).
[36] Kaminsky, G., Reinhart, C., 2000. On crises, contagion and confusion, Journal of International Economics, 51, 145-168.
[37] Kaminsky, Graciela and Reinhart, Carmen (1999). "The twin crises: the causes of banking and balance of payments problems", American Economic Review, 89, (1999), 3 p.
[38] Kaminsky, G., Linzondo, S., Reinhart, C., 1998. Leading indicators of currency crises, IMF Staff Papers, 45 (1).
[39] Kwiatkowski, D., Phillips, P. C. B., Schmidt, P., Shin, Y., 1992. Testing the Null Hypothesis of Stationarity Against the Alternative of a Unit Root. How Sure Are We that Economic Time Series Have a Unit Root? Journal of Econometrics, 54, 159-178.
[40] Khalid, A. M., Kawai, M., 2003. Was financial market contagion the source of economic crisis in Asia? Evidence using a multivariate VAR model, Journal of Asian Economics, 14, 131-156.
[41] King, M., Wadhwani, S., 1990. Transmission of volatility between stock markets, Review of Financial Studies, 3 (1), 5-33.
[42] King, M., Wadhwani, S., (1990). Transmission of volatility between stock markets. Review of Financial Studies 3, 5–33.
[43] Kordes, Laura and Pritsker, Matthew. "A rational expectations model of
[44] Krugman, Paul. "A Model of balance of payments crises," Journal of Money, Credit and Banking, 11, (1979), 14p.
[45] MacKinnon, J., 1991. Critical Values for Cointegration Tests, dans Long-Run Economic Relationships, Engle R. & Granger C. (éd.), Oxford University Press.
[46] Marais, E., Bates, S., 2005. An empirical study to identify shift contagion during the Asian crisis, Journal of International Financial Markets, Institutions & Money, à paraître.
[47] Masih, A. M. M., Masih, R., 1999. Are Asian stock market fluctuations due mainly to intra-regional contagion effects ? Evidence based on Asian emerging stock markets, Pacific-Basin Finance Journal, 7, 251-282.
[48] Masson, Paul R., 1999. Contagion: macroeconomic models with multiple equilibria, Journal of International Money and Finance, 18, 587-602.
[49] McAleer, M., Wei Nam, J. C., 2005. Testing for contagion in ASEAN exchange rates, Mathematics and Computers in Simulation, 68, 519-527.
[50] Obstfeld, Maurice, 1994. The logic of Currency crises, Banque de France, Cahiers économiques et monétaires, Banque de France, n°43.
[51] Osterwald-Lenum, M., 1992. A note with Quantiles of the Asymptotic Distribution of the Maximum likelhood Cointegration Rank Test Statistics, Oxford Bulletin of Economics and Statistics, 54, 461-472.
[52] Park, Y. C., Song, C.-Y., 2001. Institutional Investor, Trade Linkage, Macroeconomic Similarities, and Contagion of the Thai crisis, Journal of the Japanese and International Economies, 15, 199-224.
[53] Rigobon, Roberto, 2000. A simple test for stability of linear models under heteroskedasticity, omitted variable, and endogenous variable problems, MIT Working Paper.
[54] Rigobon, Roberto, 2002. Identification through Heteroskedasticity, Mit-Sloan school of management and NBER, June, 20.
[55] Rigobon, Roberto, 2003. On the measurement of international propagation of shocks: is the transmission stable? Journal of International Economics, 61, 261-283.
[56] Sander, H., Kleimeier, S., 2003. Contagion and causality: an empirical investigation of four Asian episodes, Journal of International Financial Markets, Institutions & Money, 13, 171-186.
[57] Tan, J. A. R., 1998. Contagion effects during the Asian financial crisis: Some evidence from stock price data, Pacific Basin Working Paper Series N° 98-06.
[58] Tobias, Adrien (2008). "Liquidity and contagion", Financial Stability Review, Bank of France, 11, (2008).
[59] Van Rijckeghem, Caroline and Weder, Beatrice (2000). "Financial contagion: Spillovers through banking centers", the contagion conference, (2000).
[60] Van Rijckeghem, C., Weder, B., 2001. Source of contagion: is it finance or trade, Journal of International Economics, 54, 293-308.
[61] Van Rijckeghem, C., Weer, B., 2003. Spillovers through banking centers: a panel data analysis of bank flows, Journal of International Money and Finance, 22, 483-509.
[62] Wälti, Sébastien, 2003. Testing for contagion in international financial markets: which way to go? HEI Working Paper 04/2003.
[63] ZouariI, Samir (2005). "Models of financial crises, indicators of vulnerability and involvement of the banking sector in the Asian crisis of 1997 - 1998", PHD thesis in Economic Sciences, University of Paris II Assas, (2005).
Author Information
  • Department Methods of Accounting and Finance, University of Sfax, Sfax, Tunisia

Cite This Article
  • APA Style

    Samout Ammar. (2016). Impact of the Global Crisis of the Subprime on the Current Stock Price. Journal of Finance and Accounting, 4(2), 33-46. https://doi.org/10.11648/j.jfa.20160402.12

    Copy | Download

    ACS Style

    Samout Ammar. Impact of the Global Crisis of the Subprime on the Current Stock Price. J. Finance Account. 2016, 4(2), 33-46. doi: 10.11648/j.jfa.20160402.12

    Copy | Download

    AMA Style

    Samout Ammar. Impact of the Global Crisis of the Subprime on the Current Stock Price. J Finance Account. 2016;4(2):33-46. doi: 10.11648/j.jfa.20160402.12

    Copy | Download

  • @article{10.11648/j.jfa.20160402.12,
      author = {Samout Ammar},
      title = {Impact of the Global Crisis of the Subprime on the Current Stock Price},
      journal = {Journal of Finance and Accounting},
      volume = {4},
      number = {2},
      pages = {33-46},
      doi = {10.11648/j.jfa.20160402.12},
      url = {https://doi.org/10.11648/j.jfa.20160402.12},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.jfa.20160402.12},
      abstract = {The present study is therefore based on the determination of the behavior of stock markets during the period of the subprime crisis via the phenomenon of integration and the contagion, the variable used in this study is nothing other than the stock market index. The databases used in this study are daily data of the price of stock indices of 5 developed markets and 5 emerging markets. They have been extracted from the base of the site "Yahoo Finance and economists." These indices cover the period from January 2007 to June 2014, which gives us 2000 Comments by market. The result shows well the significant increase of the coefficient of correlation between stock markets: American, French, Germany and Great Britain during the period of the crisis. We interpret this increase as a proof of the contagion. In the second place, it has tried to apply the theory of cointegration. The results of the cointegration tests show the existence of three cointegrating relationships to the more between the stock markets. The existence of cointegration relationship represents a proof of the contagion and the integration of stock markets. In the third place, it has tried to apply the criterion of the causality between the indices of actions. The result of this test demonstrates the existence of several links of causality between these indices, which confirms the importance of the contagion effect during the crisis.},
     year = {2016}
    }
    

    Copy | Download

  • TY  - JOUR
    T1  - Impact of the Global Crisis of the Subprime on the Current Stock Price
    AU  - Samout Ammar
    Y1  - 2016/03/10
    PY  - 2016
    N1  - https://doi.org/10.11648/j.jfa.20160402.12
    DO  - 10.11648/j.jfa.20160402.12
    T2  - Journal of Finance and Accounting
    JF  - Journal of Finance and Accounting
    JO  - Journal of Finance and Accounting
    SP  - 33
    EP  - 46
    PB  - Science Publishing Group
    SN  - 2330-7323
    UR  - https://doi.org/10.11648/j.jfa.20160402.12
    AB  - The present study is therefore based on the determination of the behavior of stock markets during the period of the subprime crisis via the phenomenon of integration and the contagion, the variable used in this study is nothing other than the stock market index. The databases used in this study are daily data of the price of stock indices of 5 developed markets and 5 emerging markets. They have been extracted from the base of the site "Yahoo Finance and economists." These indices cover the period from January 2007 to June 2014, which gives us 2000 Comments by market. The result shows well the significant increase of the coefficient of correlation between stock markets: American, French, Germany and Great Britain during the period of the crisis. We interpret this increase as a proof of the contagion. In the second place, it has tried to apply the theory of cointegration. The results of the cointegration tests show the existence of three cointegrating relationships to the more between the stock markets. The existence of cointegration relationship represents a proof of the contagion and the integration of stock markets. In the third place, it has tried to apply the criterion of the causality between the indices of actions. The result of this test demonstrates the existence of several links of causality between these indices, which confirms the importance of the contagion effect during the crisis.
    VL  - 4
    IS  - 2
    ER  - 

    Copy | Download

  • Sections