Empirical dynamics of emerging financial markets during the global mortgage crisis

Abstract

Focusing on five major emerging markets, I investigate the interactions between credit default swap premiums, foreign exchange rates, local currency government bond spreads, and national stock market returns over the period 4/2/2007 to 8/27/2009. Empirical analysis indicates that bond markets, along with foreign exchange markets, were very dominant in the price discovery process during a common distressed period.

Keywords

• Price discovery
• Emerging markets
• Local currency government bond
• Credit default swap
• Stock market
• Foreign exchange market