IDEAS home Printed from https://ideas.repec.org/p/fip/fednrp/9809.html
   My bibliography  Save this paper

Stock market crises in developed and emerging markets

Author

Listed:

Abstract

We empirically examine stock price index data for eight developed and ten emerging markets from 1970 to 1997. There were nine stock market crises over our sample period, three each in the developed stock markets, the Asian stock markets and the Latin American stock markets. We find important differences in the characteristics of stock market crises between the developed and emerging stock markets. While each developed market crisis has been less severe than the previous one, both in terms of the extent of price decline and the duration of the crises, this is not so for the emerging stock markets. For emerging markets stock crises, prices tend to fall rapidly and steeply, but take longer to recover, in about three years on average. For both developed and emerging markets, prices fall for at least three years subsequent to recovery from a crisis. All the crises we study are associated with contagion---i.e., most individual markets in a region are in crisis when the regional market is also in crisis. Finally, for U.S. investors with long investment horizons (six months or more), international stocks continue to provide diversification benefits even during times of market crises.

Suggested Citation

  • Sandeep Patel & Asani Sarkar, 1998. "Stock market crises in developed and emerging markets," Research Paper 9809, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednrp:9809
    as

    Download full text from publisher

    File URL: https://www.newyorkfed.org/medialibrary/media/research/staff_reports/research_papers/9809.html
    Download Restriction: no
    File URL: https://www.newyorkfed.org/medialibrary/media/research/staff_reports/research_papers/9809.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Eichengreen, Barry & Rose, Andrew K & Wyplosz, Charles, 1996. "Contagious Currency Crises," CEPR Discussion Papers 1453, C.E.P.R. Discussion Papers.
    2. Graciela Kaminsky & Saul Lizondo & Carmen M. Reinhart, 1998. "Leading Indicators of Currency Crises," IMF Staff Papers, Palgrave Macmillan, vol. 45(1), pages 1-48, March.
    3. Wen-Ling Lin & Takatoshi Ito, 1994. "Price Volatility and Volume Spillovers between the Tokyo and New York Stock Markets," NBER Chapters, in: The Internationalization of Equity Markets, pages 309-343, National Bureau of Economic Research, Inc.
    4. Simon van Norden & Huntley Schaller & ), 1995. "Speculative Behaviour, Regime-Switching, and Stock Market Crashes," Econometrics 9502003, University Library of Munich, Germany.
    5. Gikas A. Hardouvelis, 1988. "Evidence on stock market speculative bubbles: Japan, the United States, and Great Britain," Quarterly Review, Federal Reserve Bank of New York, vol. 13(Sum), pages 4-16.
    6. Neumark, David & Tinsley, P A & Tosini, Suzanne, 1991. "After-Hours Stock Prices and Post-Crash Hangovers," Journal of Finance, American Finance Association, vol. 46(1), pages 159-178, March.
    7. Robert J. Shiller, 1987. "Investor Behavior in the October 1987 Stock Market Crash: Survey Evidence," NBER Working Papers 2446, National Bureau of Economic Research, Inc.
    8. Graciela Laura Kaminsky, 1997. "Leading Indicators of Currency Crises," IMF Working Papers 1997/079, International Monetary Fund.
    9. Allen, Franklin & Gale, Douglas, 2000. "Bubbles and Crises," Economic Journal, Royal Economic Society, vol. 110(460), pages 236-255, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Brüggemann, Axel & Linne, Thomas, 1999. "How Good are Leading Indicators for Currency and Banking Crises in Central and Eastern Europe? An Empirical Test," IWH Discussion Papers 95/1999, Halle Institute for Economic Research (IWH).
    2. Marcel Fratzscher, 2003. "On currency crises and contagion," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 8(2), pages 109-129.
    3. Tassos Anastasatos & Constantina Manou, 2008. "Speculative Attacks on the Drachma and the Changeover to the Euro," Economic Bulletin, Bank of Greece, issue 31, pages 49-77, November.
    4. Mete Feridun, 2006. "Impact of Liquidity on Speculative Pressure in the Exchange Market," Discussion Paper Series 2006_24, Department of Economics, Loughborough University, revised Dec 2006.
    5. Apoteker, Thierry & Barthelemy, Sylvain, 2005. "Predicting financial crises in emerging markets using a composite non-parametric model," Emerging Markets Review, Elsevier, vol. 6(4), pages 363-375, December.
    6. Tassos G. Anastasatos & Ian R. Davidson, 2006. "How Homogenous are Currency Crises? A Panel Study Using Multiple-Response Models," Working Papers 52, Bank of Greece.
    7. Sunti Tirapat & Aekkachai Nittayagasetwat, 1999. "An Investigation of Thai Listed Firms' Financial Distress Using Macro and Micro Variables," Multinational Finance Journal, Multinational Finance Journal, vol. 3(2), pages 103-125, June.
    8. Diehl, Markus & Schweickert, Rainer, 1998. "Currency crises: Is Asia different?," Kiel Discussion Papers 309, Kiel Institute for the World Economy (IfW Kiel).
    9. Marcel Fratzscher, 2003. "On currency crises and contagion," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 8(2), pages 109-129.
    10. Marcel Fratzscher, 1998. "Why are currency crises contagious? A comparison of the Latin American Crisis of 1994–1995 and the Asian Crisis of 1997–1998," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 134(4), pages 664-691, December.
    11. Chong, Terence Tai Leung & Yan, Isabel K., 2014. "Estimating and Testing Threshold Regression Models with Multiple Threshold Variables," MPRA Paper 54732, University Library of Munich, Germany.
    12. Ho-Don Yan, 1999. "Intertemporal current account balance and the East Asian currency crises," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 5(3), pages 277-288, August.
    13. Chong, Terence T.L. & Yan, Isabel K., 2018. "Forecasting currency crises with threshold models," International Economics, Elsevier, vol. 156(C), pages 156-174.
    14. Ms. Sweta Chaman Saxena & Ms. Valerie Cerra, 2000. "Contagion, Monsoons, and Domestic Turmoil in Indonesia: A Case Study in the Asian Currency Crisis," IMF Working Papers 2000/060, International Monetary Fund.
    15. repec:cuf:journl:y:2014:v:15:i:2:abiad is not listed on IDEAS
    16. Ahmet Çimenoglu & Nurhan Yentürk, 2005. "Effects of International Capital Inflows on the Turkish Economy," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 41(1), pages 90-109, January.
    17. Mr. Abdul d Abiad, 2003. "Early Warning Systems: A Survey and a Regime-Switching Approach," IMF Working Papers 2003/032, International Monetary Fund.
    18. Marek Dabrowski & Rafal Antczak & Malgorzata Markiewicz & Artur Radziwill & Marcin Sasin, 2001. "The Episodes of Currency Crises in the European Transition Economies," CASE Network Reports 0040, CASE-Center for Social and Economic Research.
    19. Michal Pazour, 2008. "Stanovení náchylnosti ekonomiky k nadměrným tlakům na měnový kurs [Vulnerabilities in an economy to extensive pressures on the exchange rate]," Politická ekonomie, Prague University of Economics and Business, vol. 2008(5), pages 598-620.
    20. Ivo Krznar, 2004. "Currency Crisis: Theory and Practice with Application to Croatia," Working Papers 12, The Croatian National Bank, Croatia.
    21. David Fernando López Angarita, 2006. "Nivel de reservas internacionales y riesgo cambiario en Colombia," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 8(15), pages 117-159, July-Dece.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fednrp:9809. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Gabriella Bucciarelli (email available below). General contact details of provider: https://edirc.repec.org/data/frbnyus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.