Developed and emerging stock markets during the global financial crisis (GFC)

In this paper, we examine 22 benchmark stock market indices of developed and emerging countries during the period 31 December 1999-26 February 2010. We study stock market behaviour focusing on the persistence of market volatility, the leverage effect, structural breaks or shocks, and market integration and efficiency. The paper finds that most markets in the two groups behaved similarly in the GFC period. In comparison to the pre-GFC period, markets became efficient and many experienced a fall in the persistence of their volatility. The leverage effect, on the other hand, intensified during the GFC. The dates associated with the structural breaks in stock price indices are found to be same for all countries on two occasions - February 2007 and August 2008. This is an indication that market reactions were synchronised. This is unique to the GFC, as our pre-GFC analysis, which also captures the 2002 market downturns, fails to show similar synchronous behaviour