Title: Financial market returns before, during and after five European banking crises

Authors: Bac Van Luu; Vivekananda L. Sondhi

Addresses: Norges Bank Investment Management, 3 Old Burlington Street, London, W1S 3AE, UK ' Russell Investments, 10 Regent Street, London SW1Y 4PE, UK

Abstract: We study equity and bond market returns before, during, and after banking crises in the following five European countries in the early 1990s: Denmark, Finland, Italy, Norway and Sweden. With the benefit of hindsight in identifying the beginning and the end of crises, we conclude that going into the crises with Large-Cap and Growth tilts and emerging from the crisis with Small-Cap and Value tilts would have been a good strategy. We also find that Dividend Yield can be an ambiguous indicator of defensiveness whereas Dividend Cover may serve that purpose better. Staying underweight financials would have paid off well after the acute phase of the fallout. Last, but not least, government yield curves tend to steepen during a crisis and continue to steepen well after the crisis has ended.

Keywords: financial crisis; banking crisis; financial markets; equity returns; bond returns; factor returns; Europe; Denmark; Finland; Italy; Norway; Sweden; dividend yield; dividend cover; tilts; government yield curves.

DOI: 10.1504/IJMP.2013.055835

International Journal of Management Practice, 2013 Vol.6 No.3, pp.286 - 297

Received: 08 May 2021
Accepted: 12 May 2021

Published online: 06 Aug 2013 *

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