Investing against the wind: contagion during the recent financial crisis

Liping Lu, Chunyang Wang

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

This article examines the effect of Warren Buffett’s investment in Goldman Sachs on 24 September 2008, during the subprime mortgage crisis. Although this event is arguably perceived to be the biggest expression of confidence in the financial market during the crisis, by conducting event studies, we do not find the major counterparties of Goldman Sachs displayed positive abnormal returns. Moreover, the abnormal return is not significantly related to the counterparty connection. We have similar findings on these financial institutions’ default probabilities using credit default swap.

LanguageEnglish
Pages5824-5833
Number of pages10
JournalApplied Economics
Volume48
Issue number59
DOIs
Publication statusPublished - 19 Dec 2016

Fingerprint

Investing
Financial crisis
Contagion
Abnormal returns
Financial institutions
Event study
Credit default swaps
Default probability
Confidence
Subprime mortgages
Financial markets

Keywords

  • abnormal return
  • event studies
  • Financial contagion
  • financial crisis

Cite this

Lu, Liping ; Wang, Chunyang. / Investing against the wind : contagion during the recent financial crisis. In: Applied Economics. 2016 ; Vol. 48, No. 59. pp. 5824-5833.
@article{052f8860f1b047ef9bc002ccd07d1eb5,
title = "Investing against the wind: contagion during the recent financial crisis",
abstract = "This article examines the effect of Warren Buffett’s investment in Goldman Sachs on 24 September 2008, during the subprime mortgage crisis. Although this event is arguably perceived to be the biggest expression of confidence in the financial market during the crisis, by conducting event studies, we do not find the major counterparties of Goldman Sachs displayed positive abnormal returns. Moreover, the abnormal return is not significantly related to the counterparty connection. We have similar findings on these financial institutions’ default probabilities using credit default swap.",
keywords = "abnormal return, event studies, Financial contagion, financial crisis",
author = "Liping Lu and Chunyang Wang",
year = "2016",
month = "12",
day = "19",
doi = "10.1080/00036846.2016.1186793",
language = "English",
volume = "48",
pages = "5824--5833",
journal = "Applied Economics",
issn = "0003-6846",
publisher = "Routledge",
number = "59",

}

Investing against the wind : contagion during the recent financial crisis. / Lu, Liping; Wang, Chunyang.

In: Applied Economics, Vol. 48, No. 59, 19.12.2016, p. 5824-5833.

Research output: Contribution to JournalArticleAcademicpeer-review

TY - JOUR

T1 - Investing against the wind

T2 - Applied Economics

AU - Lu, Liping

AU - Wang, Chunyang

PY - 2016/12/19

Y1 - 2016/12/19

N2 - This article examines the effect of Warren Buffett’s investment in Goldman Sachs on 24 September 2008, during the subprime mortgage crisis. Although this event is arguably perceived to be the biggest expression of confidence in the financial market during the crisis, by conducting event studies, we do not find the major counterparties of Goldman Sachs displayed positive abnormal returns. Moreover, the abnormal return is not significantly related to the counterparty connection. We have similar findings on these financial institutions’ default probabilities using credit default swap.

AB - This article examines the effect of Warren Buffett’s investment in Goldman Sachs on 24 September 2008, during the subprime mortgage crisis. Although this event is arguably perceived to be the biggest expression of confidence in the financial market during the crisis, by conducting event studies, we do not find the major counterparties of Goldman Sachs displayed positive abnormal returns. Moreover, the abnormal return is not significantly related to the counterparty connection. We have similar findings on these financial institutions’ default probabilities using credit default swap.

KW - abnormal return

KW - event studies

KW - Financial contagion

KW - financial crisis

UR - http://www.scopus.com/inward/record.url?scp=84975217855&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84975217855&partnerID=8YFLogxK

U2 - 10.1080/00036846.2016.1186793

DO - 10.1080/00036846.2016.1186793

M3 - Article

VL - 48

SP - 5824

EP - 5833

JO - Applied Economics

JF - Applied Economics

SN - 0003-6846

IS - 59

ER -