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Could the global financial crisis improve the performance of the G7 stocks markets?

João Paulo Vieito, Wing-Keung Wong and Zhu Zhenzhen ()

MPRA Paper from University Library of Munich, Germany

Abstract: Financial crises are normally associated with negative effects on financial markets. In this paper, we investigate whether the most recent Global Financial Crisis (GFC) had any positive impact on the G7 (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) indices. We carry out our investigation by employing mean-variance (MV) analysis, CAPM statistics, a runs test, a multiple variation ratio test, and stochastic dominance (SD) tests. Our MV and CAPM results conclude that most of the G7 stock indices are significantly less volatile and have a higher beta, higher Sharpe ratios and a higher Treynor’s index after the GFC. Run tests and multiple variation ratio results confirm that efficiency improved in the post-GFC period. Finally, SD results conclude that there is no arbitrage opportunity and the markets are efficient due to the GFC, and, in general, investors prefer investing in the indices after the GFC. Overall, we conclude that the GFC led to markets that are more efficient and mature, confirming that crises can also have positive impacts on stock markets.

Keywords: Market Performance; the Global Financial Crisis; Randomness; Market Efficiency; Stochastic Dominance (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2015-09-09
New Economics Papers: this item is included in nep-cfn, nep-fmk and nep-ore
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Journal Article: Could the global financial crisis improve the performance of the G7 stocks markets? (2016) Downloads
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