Price Discovery in Emerging Financial Markets during the Global Mortgage Crisis

33 Pages Posted: 14 Mar 2011 Last revised: 15 Apr 2011

See all articles by Erdem Aktug

Erdem Aktug

Columbia University; Morgan Stanley

Date Written: April 10, 2011

Abstract

Focusing on five major emerging markets (EM), I investigate the interactions between credit default swap (CDS) premiums, foreign exchange (FX) parities, local currency government bond (LCB) spreads, and national stock market indices over the period 4/2/2007 to 8/27/2009. Empirical analysis indicates that the LCB markets, along with the FX markets, were very dominant in the price discovery process during a common distressed period. This finding is surprising and in sharp contrast with the literature on corporate studies. The analysis also shows that the markets were more efficient during the distressed period.

Keywords: Emerging Markets, Government Bond, Credit Default Swap, Stock Market, Foreign Exchange Market, Currency Substitution

JEL Classification: G14, G15, F30, F31, F36

Suggested Citation

Aktug, Rahmi Erdem, Price Discovery in Emerging Financial Markets during the Global Mortgage Crisis (April 10, 2011). Available at SSRN: https://ssrn.com/abstract=1783127 or http://dx.doi.org/10.2139/ssrn.1783127

Rahmi Erdem Aktug (Contact Author)

Columbia University ( email )

3022 Broadway
New York, NY 10027
United States

Morgan Stanley ( email )

1585 Broadway
New York, NY 10019
United States

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