Financial markets turbulence during highly anxious times

Abstract

Financial turbulences are a common phenomenon that have multiple times taken place and affected the global economy during the last decades. The spillover effects from different sectors of the economy into the real economy have caused it to crash numerous times along the years, effectively creating financial crises. This thesis adds to the extensive literature and research focusing on the effects of the financial markets during anxious times, a case that has troubled researchers for a long time. Utilizing the GARCH and VAR models methodologies, a thorough analysis of 4 indices takes place: Belgium’s BEL20, Hong Kong’s HSI, Mexico’s MXX and finally USA’s NASDAQ. This analysis focuses on 4 periods in total, starting from 2005 to 2007, regarding the pre 2008 Subprime Mortgage Crisis, as well as 2008 to 2009 covering the effects of said crisis. Furthermore, the period before the latest global health crisis – Covid – 19 – is also monitored, for the 2 years 2018 and 2019, while the last period covers the virus outbreak for 2020 and 2021. A brief analysis of other significant crises takes place, explained briefly by Random Matrix Theory. The overall results for the 4 indices show that indeed financial markets tend to move together during financial hardships, while volatility and risk increases