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Stock Market Reaction to the Global Financial Crisis: testing for the Lehman Brothers'Event

  • Leonardo Becchetti
  • Rocco Ciciretti

    ()

    (Department of Economics University of Roma Tor Vergata
    SEFeMEQ Department, University of Roma Tor Vergata and EPRU, University of Leicester School of Management)

We analyse with an event study approach the stock market reaction to Lehman Brothers' filing for chapter 11. Our inquiry on abnormal returns of about 2,700 stocks around the event date documents that RiskMetrics-KLD indexes capture factors affecting investors' reaction to the shock. We also find that investors rationally attribute more value to the information on each rating domain than to affiliation/non-affiliation to the FTSE KLD 400 Social Index. Investors seem to discover, after the event, that KLD ratings provide original information which is not captured by traditional financial rating indicators.

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Article provided by GDE (Giornale degli Economisti e Annali di Economia), Bocconi University in its journal Giornale degli Economisti e Annali di Economia.

Volume (Year): 70 (2011)
Issue (Month): 2 (July)
Pages: 3-58

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Handle: RePEc:gde:journl:gde_v70_n2_p5-58
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