The 2007-2009 Financial Crisis: Changing Market Dynamics and the Impact of Credit Supply and Aggregate Demand Sensitivity
This paper highlights the impact of credit supply and aggregate demand sensitivity on 91 US industries' stock performance during the 2007-2009 financial crisis. We account explicitly for changes in the market model and investigate, next to stock returns, the changes in systematic risk and idiosyncratic return induced by the financial crisis. The results show that leverage has a significantly positive effect on systematic risk changes during the financial crisis. After accounting for the change in systematic risk, the crisis induced idiosyncratic return is significantly related to industry leverage and the industry's sensitivity to aggregate demand. A subsequent analysis shows that both leverage and demand sensitivity have economically large effects on industry performance during the crisis.
|Date of creation:||May 2012|
|Date of revision:|
|Contact details of provider:|| Postal: Postbus 98, 1000 AB Amsterdam|
Web page: http://www.dnb.nl/en/
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:dnb:dnbwpp:344. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rob Vet)
If references are entirely missing, you can add them using this form.