Financial Markets Around the Great Recession: East Meets West
AbstractThe 2007-2009 great recession saw sharp drops in equity values world wide and associated strong real effects. We develop an world CAPM approach, extended to allow for infinite risk/return opportunities, short sales constraints, borrowing and saving rate differentials. With MSCI monthly data, we use this to estimate tangent portfolios, standard deviations and market prices of risk in each country. We find short selling has a strong impact, in the crisis the net supply of equity finance vanished. If short selling is impossible, investors should have switched into cash. Postcrisis it rose but was still lower than precrisis.
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Bibliographic InfoPaper provided by Department of Economics, University of York in its series Discussion Papers with number 13/29.
Date of creation: Nov 2013
Date of revision:
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Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom
Phone: (0)1904 323776
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Web page: http://www.york.ac.uk/economics/
More information through EDIRC
Great recession; World CAPM; Supply of risky finance;
Find related papers by JEL classification:
- G01 - Financial Economics - - General - - - Financial Crises
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-22 (All new papers)
- NEP-FMK-2013-11-22 (Financial Markets)
- NEP-MAC-2013-11-22 (Macroeconomics)
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