IDENTIFYING THE BOTTOM LINE AFTER A STOCK MARKET CRASH

B. M. Roehner ()
Additional contact information
B. M. Roehner: LPTHE, University Paris 7, 2 place Jussieu, 75005 Paris, France

International Journal of Modern Physics C (IJMPC), 2000, vol. 11, issue 01, 91-100

Abstract: In this empirical paper we show that in the months following a crash there is a distinct connection between the fall of stock prices and the increase in the range of interest rates for a sample of bonds. This variable, which is often referred to as the interest rate spread variable, can be considered as a statistical measure for the disparity in lenders' opinions about the future; in other words, it provides an operational definition of the uncertainty faced by economic agents. The observation that there is a strong negative correlation between stock prices and the spread variable relies on the examination of eight major crashes in the United States between 1857 and 1987. That relationship which has remained valid for one and a half century in spite of important changes in the organization of financial markets can be of interest in the perspective of Monte Carlo simulations of stock markets.

Keywords: Stock Market; Crashes; Uncertainty; Interest Rate Spread; Comparative Study (search for similar items in EconPapers)
Date: 2000
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0129183100000092
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:ijmpcx:v:11:y:2000:i:01:n:s0129183100000092

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0129183100000092

Access Statistics for this article

International Journal of Modern Physics C (IJMPC) is currently edited by H. J. Herrmann

More articles in International Journal of Modern Physics C (IJMPC) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().