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What happened to equity markets around the world during the height of the crisis in the fall of 2008

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Question;What happened to equity markets around the world during the height of the crisis in the fall of 2008? Did global markets move in tandem?In October 2007 world equity markets were standing at an all-time high USD market capitalization. The total market capitalization of all publicly traded companies in the world was US$51.2 trillion in January 2007(http://en.wikipedia.org/wiki/Market_capitalization).During the next 17 months largest destruction of equity value happened. At end of February 2009, global equity market capitalization was at just over $22 trillion, which is a drop of more than 56% and a reduction in equity value of more than $29 trillion. This loss in wealth to equity holders is equivalent in value to about 50% of global GDP for 2007. (www.researchgate.net)The 2008 Crisis was not only banking crisis, it was global financial market crisis. Equity levels were driven down across the globe, and in nearly every country, sector and industry. This was a good time to question the benefits of global portfolio diversification for risk reduction. While the mortgage and banking crises have been ongoing since the beginning of 2007,the equity market drop did not start until mid-summer of 2008, and the real equity market collapse happened in September 2008. The main two events that started equity market crisis were bankruptcy of Lehman Brother and the bailout of AIG. During the time period between September 15th 2008 and late October 2008 the majority of the decline in equity market happened. This equity crisis was universal and very severe, investors had no options to diversify their portfolios.By the end of 2008, with few exceptions, most equity indices were at 50% or less of their end of 2006 levels, and down 60% from their highs. (www.researchgate.net

 

Paper#49704 | Written in 18-Jul-2015

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