Global financial crisis and its impact on equity markets of emerging countries

Abstract

This paper tries to explore the financial linkages between global markets and emerging markets during the time of financial crisis. The idea is that, whether disturbances in global markets create panic in emerging markets also. Dynamic Conditional Correlation (DCC) is calculated between the global stock index and stock indices of emerging Asian countries. The change in correlation during the time of crisis gives an insight into the impact of the crisis. Event study (cumulative abnormal returns) methodology is also employed to ascertain the immediate impact of events during crisis on emerging country stock markets. The emerging countries chosen for the analysis are India, China, Malaysia, Thailand, Philippines, Indonesia and South Korea.