Crises in stock markets: New understanding, analysis of magnitude and frequency

A. Abramov and Maria Chernova
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A. Abramov: Russian Presidential Academy of National Economy and Public Administration (RANEPA), Moscow, Russia

Journal of the New Economic Association, 2026, vol. 70, issue 1, 74-95

Abstract: This article challenges the conventional perception of crises on stock markets as unpredictable shocks. It presents crises as regular events with recurrent declines in stock prices followed by recovery. The assessment of crisis events involves quantifying duration, maximum drawdown, and magnitude index that integrates these two parameters. An evaluation of crises across 71 countries, including Russia, indicates that such events happen with lower frequency in developed markets and tend to be less severe compared to emerging markets. Since 2008, Russia has experienced a frequency and magnitude of crises that surpassed the mean for emerging markets. The dividend policy of companies, particularly during the recovery phase, plays a crucial role in alleviating the impacts of a crisis. The total shareholder returns in Russia and emerging markets are adversely affected by the depreciation of national currencies and excessive price volatility. The magnitude and recurrence of crises adversely affect the capitalization of stock markets and financial stability of pension systems. Our analysis indicates that the primary barrier to the expansion of equity markets is the persistent decline in stock prices coupled with slow recoveries, which should be considered in financial regulatory framework.

Keywords: stock market crises; crisis magnitude index; drawdown dynamics; market recovery; equity market development; emerging markets; financial stability (search for similar items in EconPapers)
JEL-codes: G11 G14 G15 G18 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:nea:journl:y:2026:i:70:p:74-95

DOI: 10.31737/22212264_2026_1_74-95

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