Could the global financial crisis improve the performance of the G7 stocks markets?

João Paulo Vieito, Wing Keung WONG*, Zhen Zhen Zhu

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

17 Citations (Scopus)

Abstract

Financial crises are normally associated with negative effects on financial markets. In this article, we investigate whether the most recent global financial crisis (GFC) had any positive impact on the G7 (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) indices. To conduct the analysis we employ the mean–variance (MV) analysis, CAPM statistics, Hurst exponent, runs test, multiple variation ratio test and stochastic dominance (SD) tests. Our MV and CAPM results conclude that most of the G7 stock indices are significantly less volatile. The results from Hurst exponent, run tests and multiple variation ratio confirm that efficiency improved in the post-GFC period. Finally, our SD results conclude that there is no arbitrage opportunity and the markets are efficient due to the GFC, and, in general, investors prefer investing in the indices after the GFC. Overall, we conclude that the GFC led to markets that are more efficient and mature, confirming that crises can also have positive impacts on stock markets. These findings provide important information for investors and market regulators.

Original languageEnglish
Pages (from-to)1066-1080
Number of pages15
JournalApplied Economics
Volume48
Issue number12
DOIs
Publication statusPublished - 8 Mar 2016

Scopus Subject Areas

  • Economics and Econometrics

User-Defined Keywords

  • market efficiency
  • Market performance
  • randomness
  • stochastic dominance
  • the global financial crisis

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