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Discount rate or cash flow contagion? Evidence from the recent financial crises

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  • Jiang, Junhua

Abstract

Breaking the US and Greek equity market returns into a discount rate component and a cash flow component by the method of Campbell (1991), the study investigates the discount rate and cash flow contagion of the subprime mortgage crisis and European sovereign debt crisis to the Nordic equity markets. The study shows that the subprime crisis displays both discount rate contagion and cash flow contagion to the Nordic markets and the effect of discount rate contagion is more pronounced. The sovereign debt crisis, on the other hand, does not show either discount rate contagion or cash flow contagion to the Nordic markets. However, the study provides some evidence that expectations of lower future cash flows resulting from the sovereign debt crisis spread to the Finnish market.

Suggested Citation

  • Jiang, Junhua, 2017. "Discount rate or cash flow contagion? Evidence from the recent financial crises," Research in International Business and Finance, Elsevier, vol. 39(PA), pages 315-326.
  • Handle: RePEc:eee:riibaf:v:39:y:2017:i:pa:p:315-326
    DOI: 10.1016/j.ribaf.2016.07.035
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    References listed on IDEAS

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    Cited by:

    1. Akbar, Saeed & Rehman, Shafiq ur & Liu, Jia & Shah, Syed Zulfiqar Ali, 2017. "Credit supply constraints and financial policies of listed companies during the 2007–2009 financial crisis," Research in International Business and Finance, Elsevier, vol. 42(C), pages 559-571.

    More about this item

    Keywords

    Contagion; Spillover effect; Return decomposition; Financial crisis; Nordic equity markets;

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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