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Historical financial analogies of the current crisis

Andrada-Félix, Julián and Fernández Rodríguez, Fernando and Sosvilla Rivero, Simón (2011) Historical financial analogies of the current crisis. [Working Paper or Technical Report]

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Abstract

Este trabajo intenta arrojar luz sobre las analogías históricas de la crisis actual. Para ello se compara la distribución
de los rendimientos del Índice Dow Jones Industrial Average durante un período de 769 días (del 15
de septiembre de 2008, la quiebra de Lehman Brothers, hasta septiembre de 2011), con todas las distribuciones
históricas posibles de rendimientos calculados con una ventana móvil de 769 días desde e 2 de enero de
1900 al 12 de septiembre de 2008. Mediante el uso de un contraste no paramétrico Kolmogorov-Smirnov y
de un contraste de Chi cuadrado, ambos de homogeneidad en la distribución, encontramos que la distribución
de rendimientos durante la crisis actual sería similar a varios períodos anteriores de grave crisis financiera
que evolucionaron hacia intensas recesiones, siendo el episodio que abarca del 28 de mayo de 1935 al
17 de junio de 1938 el más análogo a la situación actual. Además, al aplicar el procedimiento propuesto por
Diebold, Gunther y Tay (1998) para comparar las densidades de sub-muestras, se obtiene un apoyo adicional
para nuestros hallazgos y se detecta un subperíodo entre el 10 de septiembre de 1930 y el 13 de octubre de
1933, donde la gravedad de la crisis supera la situación actual, presentando eventos más pronunciados en las
colas. Finalmente, al comparar el riesgo de mercado histórico con el riesgo actual, se observa que el riesgo de
mercado actual sólo ha sido superado por el experimentado al comienzo de la Gran Depresión.
ABSTRACT: This paper tries to shed light on the historical analogies of the current crisis. To that end we compare the
current sample distribution of Dow Jones Industrial Average Index returns for a 769-day period (from 15
September 2008, the Lehman Brothers bankruptcy, to 30 September 2011), with all historical sample distributions
of returns computed using a moving window of 769 days in the 2 January 1900 to 12 September
2008 period. Using a Kolmogorov-Smirnov and a χ 2 homogeneity tests which have the null hypothesis of
equal distribution we find that the stock market returns distribution during the current crisis would be similar
to several past periods of severe financial crises that evolved into intense recessions, being the sub-sample
from 28 May 1935 to 17 Jun 1938 the most analogous episode to the current situation. Furthermore, when
applying the procedure proposed by Diebold, Gunther and Tay (1998) for comparing densities of subsamples,
we obtain additional support for our findings and discover a period from 10 September 1930 to 13
October 1933 where the severity of the crisis overcome the current situation having sharper tail events. Finally,
when comparing historical market risk with the current risk, we observe that the current market risk
has only been exceeded in the beginning of the Great Depression.

Item Type:Working Paper or Technical Report
Uncontrolled Keywords:Financial crisis, Great Recession, Great Depression, Crisis financiera, Gran Recesión, Gran Depresión.
Subjects:Social sciences > Economics > Stock exchanges
Social sciences > Economics > Economic history
Series Name:Working Papers
Volume:UNSPECIFIED
Number:WP10/1
ID Code:14476
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Deposited On:01 Feb 2012 10:41
Last Modified:06 Feb 2014 10:02

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