DAX’s January 2008 Crash: A Routine Correction or Outright Panic

62 Pages Posted: 16 Jun 2009

See all articles by Martin Balaz

Martin Balaz

Comenius University in Bratislava, Faculty of management

Date Written: June 14, 2009


This work provides a comprehensive study of the January 2008 stock market downturn and its impact on DAX index. We find three possible causes of the crash: adverse economic news, technical trading signals and possible market manipulation (by SocGen). We find strong interdependencies among world equity indices during this period. We examine DAX’s development in the preceding years and do not find any proof of a price bubble. Rather, we find that German stock market operates with a much higher volatility than other markets. In addition, we find that financial stocks were not the most severely affected by the slump, as originally expected. In fact, utilities and insurance companies were hit most severely. We also find that the well-documented January effect has been weakening for the last few years. Finally, we look at the effects of new information on stocks, examining intraday price changes and comparing them to the news released by Reuters during the slump. The results are mixed, except for the monetary policy-related news, which had a strong impact on prices.

Keywords: DAX, January 2008, crash, panic, crisis, contagion, bubble, crash forecasting, January effect, Jérôme Kerviel, sector comparisons during a crash, technical analysis applied, information effects on stocks, volatility

JEL Classification: G14, G15

Suggested Citation

Balaz, Martin, DAX’s January 2008 Crash: A Routine Correction or Outright Panic (June 14, 2009). Available at SSRN: https://ssrn.com/abstract=1419543 or http://dx.doi.org/10.2139/ssrn.1419543

Martin Balaz (Contact Author)

Comenius University in Bratislava, Faculty of management ( email )

SK-84215 Bratislava

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics