Global Financial Crisis and International Stock Market Co-Movements: An Empirical Study

Abstract

The global financial crisis, after brewing for a while, actually started to demonstrate its consequences and encroachments in the middle of 2007 and into 2008. During this period the world stock markets have fallen, large financial institutions have been collapsed. From 2008 to 2010 it reflected as a big problem due to the U.S. Subprime credit crisis which has been began with massive defaults by Subprime borrowers in mortgage markets. This paper has analyzed the behavior or the movements of the stock markets during the crisis; both at overall market and Sectoral level (Financials, FMCG, Telecomm, Healthcare, IT, Oil gas/ energy) for the period of 2008-11. For this purpose, the study has considered mainly three stock markets; Bombay Stock Exchange (BSE-India), New York Stock Exchange (NYSE-USA) and London Stock Exchange (LSE-UK). The study is based on the daily market returns of the selected stock markets’ benchmarks viz; BSE-Sensex for India, DJIA for USA and FTSE 100 for UK. After the statistical analysis, the results of the study suggested that the all three selected countries have been affected by that crisis on somewhat level on the basis of both at market and Sector wise level.