Global Financial Crisis: Mere Dry Run for COVID-19?

12 Pages Posted: 13 May 2020

See all articles by Alfredo Martín‐Oliver

Alfredo Martín‐Oliver

University of the Balearic Islands

Florina Silaghi

Autonomous University of Barcelona

Date Written: May 13, 2020

Abstract

This paper compares the stock and credit default swap market reactions to the COVID-10 announcement with the reaction to the Lehman bankruptcy, investigating the effects of both negative news and policy measures announcements by industry. We find that the CDS market reaction is not statistically different in the two outbreaks, implying a similar increase in average credit risk across firms. In stock markets, however, although the initial response is significantly larger for COVID, it is mitigated during the days after the shock, possibly because prices reflect a search for investment opportunities rather than credit risk.

Keywords: COVID-19, Lehman Brothers bankruptcy, Credit default swap, Stock markets, Policy

JEL Classification: G14, G15, G18, G19

Suggested Citation

Martin-Oliver, Alfredo and Silaghi, Florina, Global Financial Crisis: Mere Dry Run for COVID-19? (May 13, 2020). Available at SSRN: https://ssrn.com/abstract=3599809 or http://dx.doi.org/10.2139/ssrn.3599809

Alfredo Martin-Oliver (Contact Author)

University of the Balearic Islands ( email )

Crtra. Valldemossa, km 7.5
Ed. Jovellanos
Palma de Mallorca, Illles Balears 07122
Spain

Florina Silaghi

Autonomous University of Barcelona ( email )

Business Department
Bellaterra, Barcelona 08193
Spain

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
124
Abstract Views
1,429
rank
280,385
PlumX Metrics