Abstract

https://ssrn.com/abstract=2054498
 
 

References (12)



 
 

Citations (1)



 


 



An Early Warning Signal of Financial Crisis by Using the Deepness and Liquidity in Stock Markets


Oral Erdogan


Piri Reis University

Paul B. Bennett


Fordham University Business School

Cenktan Ozyildirim


Istanbul Bilgi University

January 20, 2012

International Review of Applied Financial Issues and Economics, Vol. 4, No. 1, March 2012
Fordham University Schools of Business Research Paper No. 2054498

Abstract:     
The 'irrational exuberance' in the financial markets has been blamed for the recent subprime crisis and the consequent collapse of the global economy in 2008. This study argues that the relationship between measures of stock market 'macro deepness' and 'macro liquidity' can indicate development of abnormalities in the financial markets which generally ends up with instabilities in the real economy. First, the balance between the market deepness and market liquidity is identified using a regression analysis of panel data for 23 countries between 1991 and 2008. The residuals from the regression represent 'macro liquidity deviations' (MLD) from the 'usual' relationships between the variables. We find that the current and second lag of MLD has a significant predictive effect on current GDP growth. We conclude that watching the liquidity and deepness parameters can be a signal of heightened risk of financial crisis.

Number of Pages in PDF File: 11

Keywords: stock market liquidity, deepness, financial crisis, panel data analysis

JEL Classification: G01, G15, E44


Open PDF in Browser Download This Paper

Date posted: May 9, 2012 ; Last revised: July 9, 2012

Suggested Citation

Erdogan, Oral and Bennett, Paul B. and Ozyildirim, Cenktan, An Early Warning Signal of Financial Crisis by Using the Deepness and Liquidity in Stock Markets (January 20, 2012). International Review of Applied Financial Issues and Economics, Vol. 4, No. 1, March 2012 ; Fordham University Schools of Business Research Paper No. 2054498. Available at SSRN: https://ssrn.com/abstract=2054498

Contact Information

Oral Erdogan (Contact Author)
Piri Reis University ( email )
Postane Mahallesi
Tuzla
Istanbul, 34940
Turkey
Paul B. Bennett
Fordham University Business School ( email )
1790 Broadway
New York
New York, NY 10019
United States
917 434 0226 (Phone)
HOME PAGE: http://business.fordham.edu/faculty/bennett

Cenktan Ozyildirim
Istanbul Bilgi University ( email )
Eski Silahtarağa Elektrik Santralı
Silahtarağa Mah. Kazım Karabekir Cad. No: 1 Eyüp
Istanbul, 34060
Turkey
Feedback to SSRN


Paper statistics
Abstract Views: 1,551
Downloads: 605
Download Rank: 33,338
References:  12
Citations:  1