Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Smaller companies hit hardest during emerging market crises

22.06.2011
A study of the reaction by the United States stock market to international financial crises shows that small companies are often hit hardest, and the impact is above and beyond what would be expected given their exposure to global market factors.

This unexpected result suggests the significant impact that investors’ actions can have during emerging market crises. During these crises, investors flee to the perceived safety of big companies and shed stocks of smaller companies, despite comparable levels of international exposure during normal periods.

“The take-away is, just because you invest locally doesn’t mean you are protected from the global market,” said David Berger, an assistant professor of finance at Oregon State University.

Looking at almost 20 years of data that covered about eight large emerging market crashes, Berger and H.J. Turtle of Washington State University uncovered this flight-from-risk trend on the part of investors that flee from small stocks. The results are published in the current issue of the Global Finance Journal.

“We would expect that stock markets in two different, but related economies would crash at the same time,” Berger said. “But we found that during big market crashes, investors adjust their holdings towards bigger corporate stocks that they perceive as being safer, even after controlling for economic exposures.”

Berger said the results of his study are unexpected because past research has focused on the aggregate U.S. market as a whole and found little impact during emerging market crises.

“Investors see these big blue chip stocks as the safer ones, and small, R&D intensive stocks for example, as riskier,” Berger said. “So the stock of a smaller domestic company could take a hit because of an international shock.”

Berger studies U.S. equity markets and international stocks, and said the findings from this study have important implications for investors, even those who tend to invest mainly in the domestic market.

“Interestingly, larger stocks often benefited from emerging market crises and exhibited positive returns,” Berger added. “Because investors started dumping smaller stocks in favor of safer, larger ones, the irony is that larger multinational corporations potentially see positive benefits during international crises.”

About the OSU College of Business: The College of Business educates students for success in managing and developing sustainable, innovative enterprises in a dynamic economy. With strong graduate and undergraduate programs, internationally recognized scholarly research, and an emphasis on experiential learning, the college helps students and businesses succeed.

Dave Berger | EurekAlert!
Further information:
http://www.oregonstate.edu

More articles from Business and Finance:

nachricht Intelligent transaction tax could help reduce systemic risk in financial networks
11.04.2016 | International Institute for Applied Systems Analysis (IIASA)

nachricht Is there a bubble in the art market?
07.01.2016 | Universität Luxemburg - Université du Luxembourg

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Computational high-throughput screening finds hard magnets containing less rare earth elements

Permanent magnets are very important for technologies of the future like electromobility and renewable energy, and rare earth elements (REE) are necessary for their manufacture. The Fraunhofer Institute for Mechanics of Materials IWM in Freiburg, Germany, has now succeeded in identifying promising approaches and materials for new permanent magnets through use of an in-house simulation process based on high-throughput screening (HTS). The team was able to improve magnetic properties this way and at the same time replaced REE with elements that are less expensive and readily available. The results were published in the online technical journal “Scientific Reports”.

The starting point for IWM researchers Wolfgang Körner, Georg Krugel, and Christian Elsässer was a neodymium-iron-nitrogen compound based on a type of...

Im Focus: Atomic precision: technologies for the next-but-one generation of microchips

In the Beyond EUV project, the Fraunhofer Institutes for Laser Technology ILT in Aachen and for Applied Optics and Precision Engineering IOF in Jena are developing key technologies for the manufacture of a new generation of microchips using EUV radiation at a wavelength of 6.7 nm. The resulting structures are barely thicker than single atoms, and they make it possible to produce extremely integrated circuits for such items as wearables or mind-controlled prosthetic limbs.

In 1965 Gordon Moore formulated the law that came to be named after him, which states that the complexity of integrated circuits doubles every one to two...

Im Focus: Researchers demonstrate size quantization of Dirac fermions in graphene

Characterization of high-quality material reveals important details relevant to next generation nanoelectronic devices

Quantum mechanics is the field of physics governing the behavior of things on atomic scales, where things work very differently from our everyday world.

Im Focus: Graphene: A quantum of current

When current comes in discrete packages: Viennese scientists unravel the quantum properties of the carbon material graphene

In 2010 the Nobel Prize in physics was awarded for the discovery of the exceptional material graphene, which consists of a single layer of carbon atoms...

Im Focus: Transparent - Flexible - Printable: Key technologies for tomorrow’s displays

The trend-forward world of display technology relies on innovative materials and novel approaches to steadily advance the visual experience, for example through higher pixel densities, better contrast, larger formats or user-friendler design. Fraunhofer ISC’s newly developed materials for optics and electronics now broaden the application potential of next generation displays. Learn about lower cost-effective wet-chemical printing procedures and the new materials at the Fraunhofer ISC booth # 1021 in North Hall D during the SID International Symposium on Information Display held from 22 to 27 May 2016 at San Francisco’s Moscone Center.

Economical processing

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Networking 4.0: International Laser Technology Congress AKL’16 Shows New Ways of Cooperations

24.05.2016 | Event News

Challenges of rural labor markets

20.05.2016 | Event News

International expert meeting “Health Business Connect” in France

19.05.2016 | Event News

 
Latest News

LZH shows the potential of the laser for industrial manufacturing at the LASYS 2016

25.05.2016 | Trade Fair News

Great apes communicate cooperatively

25.05.2016 | Life Sciences

Thermo-Optical Measuring method (TOM) could save several million tons of CO2 in coal-fired plants

25.05.2016 | Power and Electrical Engineering

VideoLinks
B2B-VideoLinks
More VideoLinks >>>