Financial Markets Around the Great Recession: East Meets West
The 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.
|Date of creation:||Nov 2013|
|Date of revision:|
|Contact details of provider:|| Postal: Department of Economics and Related Studies, University of York, York, YO10 5DD, United Kingdom|
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