Research Information System
AGP International Humanities and Social Sciences Conference, Barselona, Spain, 4 - 07 February 2016, pp.1
Stock prices are mostly accepted as time series data having unit root and some events have effect on that are mostly temporary (recovers it over time- by mean reversion). On the other hand, some studies suggest that some events may cause structural changes in series by level, by trend or both and Worldwide crisis are the well known causes of structural breaks in series like asset prices. Early studies about structural breaks in time series test fixed time for the break by the method of Perron (1989). Following studies improved the idea by considering break point for estimation (Zivot and Andrews 1992; Lee and Strazicicz 2003, 2013; Norayon and Popp,2010). Multiple structural change model is developed by Bai and Perron (2003) and this method used in study. In August 2007, growing financial distress ensued the freezing of the interbank lending market. In March 2008, crisis worsened with the rescue of the Investment bank, Bear Stearns, by JP Morgan backstopped by funds from the Federal Reserve but in September, the Treasury and Fed allowed the investment bank Lehman Brothers to fail. Then in early October the crisis spread to Europe and to the emerging countries. Therefore there isn’t a fixed time for the crisis 2008 to be accepted as breakpoint to all countries. This paper investigates whether there are structural breaks and if there are when they occurred regarding 11 countries stock price indices in financial crisis of 2007-2008. Although there are structural breaks in countries price indices, they have small variations across countries in realization time. First breaking points are various months in 2008 and second break points are in 2009 – 2011. The effects of crisis in 2008 to financial markets as structural break are almost similar to all countries but recovery of crisis differentiates very much across countries.