The Financial Crisis and its Impact on Comovements of Financial Markets: Evidence from Exchange-Traded Funds
Journal Title: Journal of Economics and Business - Year 2018, Vol 1, Issue 3
Abstract
The two-fold objective of this paper is, on one hand, to study the comovements of international financial markets before and after the “subprime” financial crisis and, on the other hand, to determine their impact on international diversification, using substitutes for investable country indices, that is, exchange-traded funds. These new instruments are highly prized by investors. Three main categories of comovements are analyzed: short-term comovements as studied by contagion and dynamic conditional correlations; long-term comovements as studied by cointegration; and, finally comovements induced by the transmission of extreme values. In studying these comovements between the American market and 21 other developed and emerging markets, our results suggest that, after the financial crisis, the interdependencies and transmission of extreme values between the American market and the other markets studied increased significantly in the short term and, thus, reduced the advantages of international diversification in the short term. However, our analyses of contagion and cointegration suggest that the benefits of international diversification persist over the long term, even in times of crisis.
Authors and Affiliations
Rachid Ghilal, Ahmed Maghfor
Keywords
Related Articles
- EP ID EP392160
- DOI 10.31014/aior.1992.01.03.24
- Views 79
- Downloads 0
Value Creation in a ‘Non-Producing’ Enterprise
A widely-held proposition is that an enterprise does not create value until it commences production of goods or services for external customers for monetary profit. Another related proposition is that employees in a ‘non...
Economic Environment and Performance of Donor Funded Health Projects in Kenya
Health projects have been found to play a critical role in enhancing the well-being of society. Health projects in Kenya are funded by both the government and donors. Although the amounts of funding from donors in Kenya...
Organic Agriculture Contribution to the Rural Tourism Development in the North of Montenegro
This research was conducted in order to determine the benefits that local communities in Montenegro can achieve by developing rural tourism. The main aim of this paper is to establish how organic agriculture can contribu...
Sustainable Development vs. Middle-Income Trap
The middle-income trap (MIT) describes a situation faced by countries at a relatively mature stage of development that often poses an obstacle to sustainable long-term growth. The MIT is characterized by declining factor...
Classification of Credit Security in Nigeria: Resolving the Perceived Dichotomy
This article is focused on the classification of credit security in Nigeria with a view to resolving the perceived dichotomy in the categorization. Credit security generally is within the ambit of property law which is c...