Analysing the effect of the financial crisis on emerging markets : a comparative analysis of the before and after stock market situation

Abstract

The following dissertation attempts to analyse the establish whether the BRIC’s stock market returns were affected by U.S. financial stress during the 2008 Financial Crisis. Subsequently, studying the relationship between U.S. Stock Markets to emerging market Stock Market Returns. Studying whether emerging markets are the next advanced economies and their level of integration with advanced economies, is one of the most debatable issues in the Banking and Finance industry, and also the world. Therefore, this study will give a shed light on whether investing in emerging markets can be a good opportunity to diversify the investors’ portfolio. This research starts by giving a brief overview about the nature of emerging markets and the financial crisis in general. The chapter proceeds by posing the research questions as to whether the 2008 Financial Crisis affected emerging stock market returns. It then moves to explain the author’s motivation behind the study and the importance of the objectives behind it. The regression analysis consists of running an equation of the dependent variable, the BRIC’s stock market returns, against a number of regressors. Such explanatory variables include U.S.’ industrial production, U.S.’ unemployment rate, U.S.’ S&P500, the Michigan confidence index, the BRIC’s consumer price index and industrial production.