Investing against the wind: contagion during the recent financial crisis

Liping Lu, Chunyang Wang*

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review


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.

Original languageEnglish
Pages (from-to)5824-5833
Number of pages10
JournalApplied Economics
Issue number59
Publication statusPublished - 19 Dec 2016


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


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