The impact of crises and recessions on excess equity returns
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2016-08-24
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en
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Abstract
This study examines excess return on equities and the effect of financial crises and recessions on excess
equity returns. Excess equity returns are observed in three northern European countries: The
Netherlands, Germany, and Belgium and three southern European countries: Italy, Spain, and Greece.
Excess returns on equity in the United States are also included in the study.
The Capital Asset Pricing Model and the Arbitrage Pricing Theory are often used to price equities. The
statistical analysis uses a modification of the Arbitrage Pricing Theory in order to explain excess return
on equity in the countries that are involved in the study.
The results show that both the presence of a recession and the probability of an upcoming recession
have a significantly negative influence on the level of excess returns on equity. However, the other
variables that are used as explanatory variables in this model have an ambiguous impact on the level
of excess equity returns.
Mirjam
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Faculteit der Managementwetenschappen