Sectoral and industrial performance during a stock market crisis

Kumari Ranjeeni

Economic Systems, 2014, vol. 38, issue 2, 178-193

Abstract: This paper investigates the impact of the news announcement of the Lehman Brothers’ (LBs) bankruptcy on the performance of the New York Stock Exchange (NYSE) sectors and financial industries. Based on descriptive index level results, Bartram and Bodnar (2009) conclude that the reaction of all sectors and industries was homogeneous during the LBs’ bankruptcy and equity investors could not benefit from diversification. Motivated by Narayan and Sharma's (2011) findings on firm and sector heterogeneity, this paper employs an event study approach to further examine the sectoral and industrial performance during the bankruptcy period. Daily data for a total of 481 firms is examined. The main contribution of this paper is that it provides evidence that sectors behave heterogeneously during a stock market crisis and the significant adverse impact from the LBs’ bankruptcy is discriminatory toward the financial sector and the diversified financial industry, which were most exposed to LBs. This paper proposes for investors to short sell those sector's or industry's securities that are anticipated to be the most significantly adversely affected from a particular negative news announcement.

Keywords: Lehman Brothers’ bankruptcy; Global financial crisis; Abnormal returns; Sectors; Trading strategy (search for similar items in EconPapers)
JEL-codes: G01 G11 G14 G21 G33 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:38:y:2014:i:2:p:178-193

DOI: 10.1016/j.ecosys.2013.12.002

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