Industry Effect and Stock Market Reaction to Global Financial Crisis: A Comparative Analysis

This paper aims at analyzing the “industry effect†on stock market reaction to global financial crisis. This has been conducted using a sample of 4 stock markets, and covering the period from 2007 to 2011. Kruskal-Wallis tests indicated that we could accept hypotheses regarding the effects of “industry effect†on stock market reaction to global financial crisis in Egyptian, Kuwaiti, American and British stock markets for all the research period and for the during- crisis period, where the most negatively affected sectors are “insurance†and “real estate†for the Egyptian and the Kuwaiti markets, while “banking†is the most negatively affected sector for the British and American ones. Also, they referred to the need to reject the hypotheses regarding these effects in all stock markets, for the pre-crisis period. Tests indicated that we could accept hypotheses regarding the effects of “country effect†on stock market reaction to global financial crisis in banking, insurance and real estate sectors. Results of “country effect†tests are consistent with those of “industry effect†in periods and sectors. Tests of the two hypotheses could be considered as robustness checks for each other.