Love, InessaDidier, TatianaPeria, Maria Soledad Martinez2012-03-192012-03-192010-03-01https://hdl.handle.net/10986/3711This paper examines the determinants of stock markets' vulnerability to the 2007-2008 crisis. Given that the United States (US) was the crisis epicenter, the authors analyze the factors driving the co-movement between US returns and stock returns in 83 countries. The analysis distinguishes between the period before and after the collapse of Lehman Brothers. The findings indicate that the main channel of transmission was financial. There is also evidence of a "wake-up call" or "demonstration effect" in the first stage of the crisis, because countries with vulnerable banking and corporate sectors exhibited higher co-movement with the US market. However, despite a collapse in trade across countries, the analysis does not find support for this channel of transmission.CC BY 3.0 IGOASSET ALLOCATIONASSET RATIOSASSET VALUESASSETS RATIOASYMMETRIC INFORMATIONBALANCE OF PAYMENTBALANCE OF PAYMENTSBANK ACTIVITIESBANK LENDINGBANK LIQUIDITYBANK POLICYBANK REGULATIONBANKING ASSETSBANKING REGULATIONBANKING SECTORBILATERAL TRADEBONDBOND MARKETSBUDGET DEFICITBUDGET SURPLUSCAPITAL ACCOUNTCAPITAL ADEQUACYCAPITAL FLOWSCAPITAL INFLOWSCAPITAL MARKETCAPITAL MARKET DEVELOPMENTCASH FLOWSCENTRAL BANKCOMMODITYCOMMODITY PRICESCOMPETITIVENESSCOMPOSITE INDEXCORPORATE DEBTCOUNTRY DUMMIESCOUNTRY FIXED EFFECTSCOUNTRY RISKCREDIT DEFAULTCREDIT DEFAULT SWAPCREDIT RATINGSCREDITORSCRISES IN EMERGING MARKETSCRISIS COUNTRYCURRENCYCURRENCY CRISESCURRENT ACCOUNT BALANCEDATA AVAILABILITYDEBT LEVELSDEBT OBLIGATIONSDEPOSITDEPOSIT MONEY BANKSDEVELOPING COUNTRIESDOMESTIC STOCKEFFECT OF LIQUIDITYEMERGING MARKETSEQUITY HOLDINGSEQUITY MARKETEQUITY PORTFOLIOSEQUITY RETURNSEXCHANGE RATEEXCHANGE RATE MOVEMENTSEXCHANGE RATESFEDERAL RESERVEFINANCE CORPORATIONFINANCIAL ANALYSTSFINANCIAL CRISESFINANCIAL CRISISFINANCIAL DEVELOPMENTFINANCIAL EXPOSUREFINANCIAL EXPOSURESFINANCIAL FLOWSFINANCIAL INSTABILITYFINANCIAL INSTITUTIONSFINANCIAL INTEGRATIONFINANCIAL MARKETFINANCIAL MARKETSFINANCIAL OPENNESSFINANCIAL STRUCTUREFINANCIAL STUDIESFOREIGN DIRECT INVESTMENTFOREIGN EQUITYFOREIGN HOLDINGSFOREIGN INVESTMENTSFOREIGN INVESTORSFOREIGN MARKETSFOREIGN PORTFOLIOFOREIGN PORTFOLIO INVESTORSGDPGLOBAL EQUITYGLOBAL EQUITY MARKETGLOBAL EXCHANGEGLOBAL MARKETGOVERNMENT BUDGETGROWTH RATEHOLDINGHOUSING FINANCEINCOMEINCOME EFFECTINDEBTEDNESSINSURANCEINSURANCE PRODUCTSINTEREST EXPENSESINTEREST PAYMENTSINTEREST RATEINTERNATIONAL ASSETINTERNATIONAL BANKINTERNATIONAL CAPITALINTERNATIONAL ECONOMICSINTERNATIONAL EQUITYINTERNATIONAL FINANCEINTERNATIONAL FINANCIAL CONTAGIONINTERNATIONAL FINANCIAL MARKETSINTERNATIONAL FINANCIAL STATISTICSINTERNATIONAL FINANCIAL SYSTEMINTERNATIONAL INVESTMENTINTERNATIONAL INVESTORSINTERNATIONAL RESERVESINTERNATIONAL SETTLEMENTSINVESTMENT ASSETSINVESTMENT BANKINGLIQUID ASSETSLIQUID BANKSLIQUID MARKETSLIQUIDITYLIQUIDITY RATIOLIQUIDITY VARIABLELOANLOAN OBLIGATIONSLOCAL CAPITAL MARKETLOCAL MARKETLOCAL MARKETSLOCAL STOCK MARKETMACROECONOMIC SHOCKSMACROECONOMIC VULNERABILITIESMACROECONOMIC VULNERABILITYMARKET CAPITALIZATIONMARKET CONTAGIONMARKET DATAMARKET INTEGRATIONMARKET LIQUIDITYMARKET PERFORMANCEMARKET RETURNMARKET RETURNSMARKET SIZEMARKET TURNOVERMERCHANDISEMERCHANDISE EXPORTSMORTGAGEMORTGAGE DEBTMORTGAGE LENDINGMORTGAGE MARKETMORTGAGE MARKETSMORTGAGE-BACKED SECURITIESMUTUAL FUNDMUTUAL FUND INVESTMENTOPEN COUNTRIESOUTPUTSPOLICY RESPONSESPORTFOLIOPORTFOLIO INFLOWSPORTFOLIO INVESTMENTPORTFOLIOSPOSITIVE COEFFICIENTSPRICE CHANGESPRIVATE CAPITALPRIVATE CAPITAL FLOWSPRIVATE CREDITPRIVATE SECTOR DEVELOPMENTREAL ESTATEREAL GDPRESERVESRESIDENTIAL MORTGAGESRETURNRETURN ON ASSETSRETURNSRETURNS DATARISK AVERSIONSECURITIESSHARE OF EQUITYSHORT-TERM DEBTSPREADSTOCK MARKETSTOCK MARKET CAPITALIZATIONSTOCK MARKET INDEXSTOCK MARKET LIQUIDITYSTOCK MARKET PRICESSTOCK MARKET RETURNSTOCK MARKET RETURNSSTOCK MARKETSSTOCK PRICESTOCK RETURNSTOCK RETURNSSTOCKSSUPERVISION OF BANKSTERMS OF CAPITALTHIRD MARKETSTIME DUMMIESTOTAL DEBTTREASURYTURNOVER RATIOVOLATILITYWEALTHWORLD DEVELOPMENT INDICATORWORLD DEVELOPMENT INDICATORSWorld Bank10.1596/1813-9450-5224