Financial market returns before, during and after five European banking crises

Bac Van Luu and Vivekananda L. Sondhi

International Journal of Management Practice, 2013, vol. 6, issue 3, 286-297

Abstract: We study equity and bond market returns before, during, and after banking crises in the following five European countries in the early 1990s: Denmark, Finland, Italy, Norway and Sweden. With the benefit of hindsight in identifying the beginning and the end of crises, we conclude that going into the crises with Large-Cap and Growth tilts and emerging from the crisis with Small-Cap and Value tilts would have been a good strategy. We also find that Dividend Yield can be an ambiguous indicator of defensiveness whereas Dividend Cover may serve that purpose better. Staying underweight financials would have paid off well after the acute phase of the fallout. Last, but not least, government yield curves tend to steepen during a crisis and continue to steepen well after the crisis has ended.

Keywords: financial crisis; banking crisis; financial markets; equity returns; bond returns; factor returns; Europe; Denmark; Finland; Italy; Norway; Sweden; dividend yield; dividend cover; tilts; government yield curves. (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijmpra:v:6:y:2013:i:3:p:286-297

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