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Management Science


No Place To Hide: The Global Crises In Equity Markets in


In this article researcher highlights the crises which happened in 2007-2008
especially in USA market and then flew to other developed economies. By end of
February 2009, the World Equity Market (USA highest global market capitalization)
dropped with 56% as to $22 trillion from $51 trillion. The phenomena of financial
crises not new, many years ago banking crises also effected the investor equity and
change their perception against investing. They look at the performance of equity in
financial market by end February 2009, the behavior of global equity since 2007
while focusing on return and volatility. They also tried to investigate some current
market declining while compare it with a historical financial crises happened in US,
at zero crises in financial sector they find the impact of market instability on
portfolio investing style in financial versus non-financial sector. Finally the impact of
financial crises on return volatile measures and both the correlation across region as
well as sectors.
The basic story about 2007 crises was concerned with mortgage and banking crises
although equity crises was started initially in September 2008 when the bankruptcy
of bailout of AIG and Lehman. This paper divided into different section as follow.
1. Overall Market Performance:
In this section of the paper, researcher highlight the total return behavior, dividend,
shares purchase but excluding tax adjustment and portfolio measure of DS World
Bank (Data Stream) in USA from 2007 to February 2009. They said that world equity
market which grown in 2007 by 15% again fall down in first 6-8 months of 2008
during crises period. Financial crises 2008-2009 were the serious decline equity
market due to discount rate and the perception of market risk. Although many
researchers on the basis of different factors suggested that market decline can be
driven by declining in discount rate rather than rising in expected dividend.
2. Market Sector Performance
Crises effect financial sector more as compare to non-financial sectors. In this
section researchers investigate relative performance of financial vs non-financial
sector about overall market portfolio and found that overall performance of nonfinancial sectors throughout crises was good as compare to financial crises.
Comparison of financial and non-financial sectors were done for 3 regions are United

State, Developed Market ex North America and Emerging Market. USA non-financial
sector under performance in overall crises period and its financial sector also worst
for 2 year of crises. Emerging Market financial sector performance were more as
compare with their non-financial sector performance. In general volatility for all
three region about non-financial sector were on the same direction but slightly US
region has more.
3. Country Market Analysis
Emerging Market and Developed World ex North America conglomerate a large
number of countries like Europe, Japan, United Kingdom and United State etc. and
some other countries in the portfolio. In this section they see how equity value of
major countries impact by financial crises and their currency fluctuation. Diagram
shown that Japan perform poorly and other countries performing well in 2007. In
local currency also Japan performance was too low while other countries like United
Kingdom go ahead.
4. Industry Performance
This section is about the performance of sum of different value of industry
portfolio for group of countries and regions. First see the performance of industry
of United State, the Developed Market ex North America and the Emerging
Market. First starting with USA which financial industry declined in crises 20%
more than any other industry of US. In US almost all other countries region
industries like oil and gas performed well till 2008. Emerging Market is quite
different, its financial industry performed well in2008 but in 2009 it value slightly
down by losing value of 17%. Technology industry is the biggest losing value
industry of Emerging Market down its value of 52.3% for the whole crises period
while healthcare was the top performance industry of Emerging Market.
5. Financial Sector Performance
As we already explained that financial sector was the main reason of crises. In
this section the performance of major finance industry and its sub industries like
banks, insurance, real estate and financial services were highlighted in the
regions of United State, the Developed Market ex North America and Emerging
Market. Figure shown that sub industries were performed slightly positive
however banks under performed these sub industries. It is also described that
the worst days of the sub industries were financial crises. Financial sector not
poor performance in Emerging Market and their performance ware as like sub
industries. Insurance was the best to maintain their performance positive in
6. Style Portfolio Performance

In this section the performance of basic style factor of investing, growth vs value
and size were discussed in two group small core portfolio and large. In general,
growth portfolio add performance and small portfolio less performed.
7. Volatility
In this part impact of volatility behavioral has checked that how it impacts on
three major market regions. Volatility in all three markets were more correlated
and for a sample period.
8. Correlation
In this section, structure of correlation among return for a sample period has
been checked.
Besides to adopt many methods, they just choose three approaches:
To check the change in average across country correlation at market
level in historical and present crises for the two top markets
Correlation across industries with region and countries and across
Daily correlation of pre and past crises related to change in price and
stocks across markets from Europe to US regions.
9. Conclusion and Implication for future studies:
After detail discussion there are many questions and issue arise. After detail
discussion there are many questions and issue arise but the focus is linking to
banking sectors and its regulations. There are different macro-economic
factors which are more considerable for researcher to provide information
and effects of these factors on performance of equity of different countries
and determining economic resources of the effect. Impact of crises also
caused by strategy of global investing.
This paper discussed about financial crises happened in 2007-2009. It show
equity performance in global equity market during financial crises years as
well as country and industry. In addition, equity market effect is the second
major issue happened in September 2008 when after mortgage and banking
sectors. They compare the performance of financial sector with non-financial
sector. As result it is also suggested that diversification provide help to
investor when market if dropping.