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 journalJournal articlepeer-review

    24 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
    Early online date5 Oct 2015
    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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