How Deep Was the September Stock Exchange Crisis? Putting Last Events into Perspective on the American and French Stock Markets with an Index of Market Shocks
7 Pages Posted: 20 Feb 2002
Date Written: January 2002
Following the World Trade Centre disaster, markets reacted strongly both in Europe and in the United States. The extent of this crisis was difficult to assess at the time, underlining the need for a specific tool to measure the gravity of financial crises. A first measure is recently proposed and applied to the exchange rates market by Zumbach, et al (2000-a and 2000-b). Their measure relies on an analogy with geophysics; the related Index Market Shocks (IMS) that we propose here is also analogue to the Richter scale used for earthquakes. We implement this measure on the French and the American stock markets in order to put into perspective the recent market events. The crisis induced by September attacks was actually the worst since 1987. However, when compared with the major historical crises, this one is not amongst the ten worst - neither in magnitude nor length.
Keywords: Financial crises, Volatility, Risk Measurement, Heterogeneity of Economic Agents
JEL Classification: G10, G14
Suggested Citation: Suggested Citation