Global financial markets

Topics: Stock market, Subprime mortgage crisis, Bank Pages: 44 (5138 words) Published: November 15, 2013
GLOBAL FINANCIAL MARKETS
Name: Rasheed Akewusure
Student no: 2710157
Module Reference Number: BAF-7-GFM.1
Module Coordinator: Dr. Carolina Valiente
Word Count: 3,997

Abstract

The U.S. stock market experienced the worst bear market in its history since the Great Depression during the October 9, 2007-March 9, 2009 period. The stock market crash was mainly caused by the U.S. banking sector crisis in 2008. As a result of this crisis, the U.S. financial sector has received considerable attention in recent empirical studies. In this paper, I evaluate the performance of the U.S. Equity market, banking sector and a selected financial institution during the October 2002-August 2009 period, which covers the October 2002-September 2007 bull market, the October 9, 2007-March 9, 2009 bear market. It also links to a series of articles on the causes and impact of the financial crisis in the UK. No amount of monetary or fiscal policy can fix the errors of the past, just like no modern treatment can quickly fix up to health a drug addict incapacitated from a decade-long drug abuse.

Table of Contents
Global Financial Markets (2002-2007)

1. Introduction………………………………………………………………………………… 3 2. Methodology………………………………………………………………………………... 3 3. Main Events and Trend of U.S. Equity Market………………………………..4 4. Performance of U.S. Equity Market Vs Banking Sector…………………..6 5. Bank of America performance Vs the sector and the market.8 IMPACT OF THE FINANCIAL CRISIS

6. On the performance of the U.S. Financial Market and Economy………10 7. On the U.S. Banking Sector………………………………………………………………12 8. On Bank of America, Measures taken to pull through crisis and the effects on share prices……………………………………………………………………14 9. Forecast of Future Share prices for U.S. Equity Market, Banking Sector and Bank of America……………………………………………………………15 Summary and Conclusion

References
Appendix
Glossary

Introduction
Independently and jointly, the world Stock markets act as an important role in the majority national economies. Several economic and political functions are exercised by the market whilst offering opportunities such as investing, trading, hedging, speculating, and arbitraging. In addition they serve as a mechanism for price discovery and information dissemination while providing vehicles for raising finances for companies. Stock markets are used to implement privatization programs, and they often play an important role in the development of emerging economies (Lee, 1998). The performance of a stock market of an economy is of interest to various parties including investors, capital markets, the stock exchange and government among others. Stock market performance is influenced by a number of factors key among them the activities of governments and the general performance of the economy. Economic activities do affect the performance of stock markets. Other factors that affect the stock market’s performance include, availability of other investments assets, change in composition of investors, and markets sentiments among other factors (Mendelson, 1976). Methodology

As the main objective of this paper is to study the impact of Subprime crisis on U.S. stock market, financial sector and a chosen financial institution, therefore daily data of S&P 500 stock indexes between May 2002 to December 2009, S&P banking index and also the Bank of America’s Index were studied. Investigation on S&P 500 stock indexes that includes 500 leading U.S. stocks allows this paper to generate a better understanding based on largest and most established companies in U.S. The full period of study is then divided into 2 different stages to allow behavior of stock market performance to be investigated in each stage or sub-period of Subprime crisis. Referring to the facts and figures provided by Yahoo! Finance and Bloomberg, the following sub-periods are developed: The US bull market (Oct 2002 to mid-September 2007), the U.S....

References: Figure 1: U.S. Bull Market (2002-2007)
Farr 2008, states there are several factors that drove the Stock Market Higher From 2003-2007 such as:
Figure 2: US Bear Market (2007-2009)
During the bear market an intense dispute arose as to whose caused the stock market falling
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