Economic Systems: Sectoral and Industrial Performance During A Stock Market Crisis

G Models
ECOSYS-466; No. of Pages 16
Economic Systems xxx (2014) xxx–xx
Contents lists available at ScienceDirec
Economic Systems
journal homepage: www.elsevier.com/locate/ecosy
Sectoral and industrial performance during a stock market

crisis
Kumari Ranjeeni*
The University of the South Pacific, Laucala Campus, Suva, Fiji
ARTICLEINFO ABSTRACT
Article history: This paper investigates the impact of the news announcement of the Lehman
Received 20 September 2013 Brothers’ (LBs) bankruptcy on the performance of the New
Received in revised form 11 October 2013 YorkStockExchange(NYSE)sectorsandfinancialindustries.Basedon descriptive
Accepted 5 December 2013 index level results, Bartram and Bodnar (2009) conclude
that the reaction of all sectors and industries was homogeneous during the LBs’
JEL classification:
bankruptcy and equity investors could not benefit from diversification. Motivated
G01
by Narayan and Sharma’s (2011) findings on firm and sector heterogeneity, this
G11
paper employs an event study approach to further examine the sectoral and
G14
G21 industrial performance during the bankruptcy period. Daily data for a total of 481
G33 firms is examined. The main contribution of this paper is that it provides evidence
that sectors behave heterogeneously during a stock market crisis and the
significant adverse impact from the LBs’ bankruptcy is discriminatory toward the
financial sector and the diversified financial industry, which were most exposed
Keywords: to LBs. This paper proposes for investors to short sell those sector’s or industry’s
Lehman Brothers’ bankruptcy securities that are anticipated to be the most significantly adversely affected from
Global financial crisis a particular negative news announcement.
Abnormal returns 2014 Elsevier B.V. All rights reserved.
Sectors
Trading strategy
1. Introduction
The non-strategic bankruptcy of Lehman Brothers (LBs) 1 occurred in the United States (US) financial sector. The
market considers a non-strategic bankruptcy to be bad news having an adverse
* Tel.: +61 410199805.

E-mail address: kumariranjeeni1@yahoo.com.
1 LBs was a distressed financial institution that filed for Chapter 11 bankruptcy with petition no. 308-13555 on 15 September, 2008 (see
Dumontaux and Pop, 2012; Chong, 2011).
http://dx.doi.org/10.1016/j.ecosys.2013.12.002 0939-3625/ 2014

Elsevier B.V. All rights reserved.
Please cite this article in press as: Ranjeeni, K., Sectoral and industrial performance during a stock market crisis.
Econ. Syst. (2014), http://dx.doi.org/10.1016/j.ecosys.2013.12.002
2 G Models K. Ranjeeni / Economic Systems xxx (2014) xxx–xxx
impact on the stock market performance (Coelho and Taffler, 2008). In addition, a crisis originating from the financial
sector is widely believed to be more contagious and risky than those in other sectors of the economy (Kaufman, 1994).
Evidence suggests that the LBs’ bankruptcy triggered incredible declines in index levels and escalated price volatility
universally (Bartram and Bodnar, 2009; Chong, 2011; Eichler et al., 2011; Samarakoon, 2011). The index levels at
aggregate level proxy the performance of the stock market firms and sectors. A disadvantage of examining index level
performance is that all firms and sector constituents of the index are erroneously assumed to be homogeneous.
Similarly, based on descriptive index level results, Bartram and Bodnar (2009) show that the LBs’ bankruptcy had a
homogenous impact on the performance of all sectors and industries and that equity investors could not benefit from
diversification. However, a recent study by Narayan and Sharma (2011) suggests that share market firms and sectors
are heterogeneous in nature, with an implication that the LBs’ bankruptcy may not impose a significant adverse impact
across all sectors. The question that therefore arises is: Did the LBs’ bankruptcy have a homogenous impact on the
performance of all sectors or was the adverse impact heterogeneous toward the financial sector and the diversified
financial industry which were most exposed to LBs? This research question has not been addressed so far. Therefore,
this study takes the initiative of using a disaggregated approach to investigate whether the financial sector and the
diversified financial industry were most significantly adversely affected during the LBs’ bankruptcy. This paper also
highlights the economic significance of results.
This study is motivated by four pioneering studies: Raddatz (2010), Bartram and Bodnar (2009), Dumontaux and
Pop (2012) and Pichardo and Bacon (2009). Bartram and Bodnar (2009) provide evidence that the index returns of all
sectors and industries were adversely affected during the LBs’ bankruptcy (12 September 2008–27 October 2008).
However, Bartram and Bodnar (2009) provide only descriptive index level results. Therefore, no conclusions can be
drawn on the significance (if any) of the impact of the LBs’ bankruptcy on the sectors and industries. On the other
hand, Raddatz (2010), Dumontaux and Pop (2012) and Pichardo and Bacon (2009) used event study methodologies and
significance tests to examine stock price returns during the LBs’ bankruptcy. Raddatz (2010) investigated the impact of
the LBs’ bankruptcy on stock price returns of 662 individual banks across 44 countries excluding the US. Dumontaux
and Pop (2012) examined the contagion effects from the LBs’ bankruptcy on the surviving large US financial
institutions for the year 2008. Pichardo and Bacon (2009) examined abnormal returns of 15 investment firms, 9 of
which had significant stakes in LBs, for the period between 1 September 2008 and 27 October 2008.
Although Dumontaux and Pop (2012) and Pichardo and Bacon (2009) have used significance tests to examine
abnormal return performance during the LBs’ bankruptcy, the investigation is conducted only on US financial firms
that are large1 and/or operating in the same industry as LBs. Likewise, Raddatz (2010) examined the performance of
banks.
The absence of a thorough investigation of the impact of the LBs’ bankruptcy across sectors and financial industries
is a gap in the literature. A thorough investigation is important for two reasons. (1) Stronger conclusions can be drawn
on the pervasiveness of the impact from the LBs’ bankruptcy to ascertain better insights on whether sectors and
industries behave homogeneously or heterogeneously during such volatile periods. (2) The disaggregated sectoral and
industrial level analysis will enable the construction of profitable trading strategies. Consequently, this paper extends
the extant literature by employing an event study methodology and thoroughly investigating the impact of the news
announcement of the LBs’ bankruptcy on the performance of 10 sectors and all 4 financial industries 2 from the NYSE.
All financial firms (irrespective of firm size) and financial industries including real estate investment trusts (REITs) and
insurances are examined. The event study analysis used in this paper is not only robust but also has strong theoretical
foundations.3
The main contributions of this paper are as follows. First, it provides evidence that sectors behave heterogeneously
during a crisis. During the LBs’ bankruptcy, the firms’ returns were affected differently depending on their sectoral and
financial industrial location. Second, this paper shows that the financial sector and the diversified financial industry,
being the most exposed to LBs, were most significantly adversely affected during the LBs’ bankruptcy. Third, the
results suggest that investors could short sell those sectors’ or industries’ securities that are anticipated to be the most
significantly adversely affected from a particular negative news announcement. This paper provides evidence that those
investors who engaged in the short sale of financial sector and diversified financial securities over the [4, 0] window
1 ‘‘Large’’ is defined as firms ‘‘that reported total assets higher than US$ 1 billion in the last audited financial report before the event date’’
(Dumontaux and Pop, 2012, p.8).
2 An ‘‘industry’’ specifically refers to a group of firms involved in the same line of business operations, while a ‘‘sector’’ comprises a group of
similar industries.
3 Conversely, Bartram and Bodnar (2009) findings were only descriptive. The event study approach employed follows the theory of market
efficiency and supports Pichardo and Bacon (2009) on the efficiency of the US market during the LBs’ bankruptcy.
G Models K. Ranjeeni / Economic Systems xxx (2014) xxx–xxx 3
would have benefited. The AAR from a short sale on day-4 followed by a short covering on day 0 is a significant (at
the 1% level) 5.66% for the financial sector and 8.83% for the diversified financial industry.
The remainder of this paper is organized as follows. Section 2 develops the hypotheses. Next, the methodology and
data used are discussed. This is followed by a presentation of the main findings of this study and robustness testing of
the results in Sections 4 and 5, respectively. In Section 6, the economic significance of the results is discussed. The
final section provides concluding remarks.
2. The relationship between Lehman Brothers, the financial sector and the diversified financial industry
Gorban et al. (2010) suggest that, in times of crisis, correlation and volatility (risk) increase simultaneously amongst
firms and sectors.4 Acharya et al. (2009) show the LBs’ bankruptcy having significant systematic risk and Bartram and
Bodnar (2009) find increased correlation across the US sectors following the LBs’ bankruptcy. However, there is also
evidence to suggest that firms with direct credit or investment exposure to LBs suffered more than those not directly
exposed to LBs (Dumontaux and Pop, 2012; Pichardo and Bacon, 2009; Chakrabarty and Zhang, 2010).
Bartram and Bodnar (2009) find all US sector indices suffering a decline in returns and having increased volatility
during the LBs’ bankruptcy. However, the US financial sector had a higher standard deviation than the non-financials
(Bartram and Bodnar, 2009). LBs, being a constituent of the US financial sector, is likely to associate more with firms
from the financial sector as opposed to firms from other sectors. Additionally, LBs had heavily invested in securities
linked to the US subprime mortgage market. The financial industries, namely banks, diversified financials, insurances
and REITs, were involved in subprime mortgages. It follows that, since these financial industries are constituents of the
financial sector, LBs was most associated with the financial sector in comparison to other sectors. In Table 1, the
correlation between the LBs’ price returns and each of the sector’s index returns is provided for the periods before the
global financial crisis (GFC) (1994–2006) and during the GFC (2007–15 September 2008).
Table 1 shows that the financial sector was significantly positively correlated with LBs at the 1% level. LBs was
most strongly correlated with the financial sector (the correlation coefficient was 0.63) during the GFC. This drives the
motivation for the need to examine whether the LBs’ bankruptcy most significantly adversely influenced the financial
sector performance.
Hypothesis 1. Financial sector performance is the most significantly adversely affected during the LBs’ bankruptcy.
Bartram and Bodnar (2009) find all US financial sector industries to be adversely affected during the LBs’
bankruptcy. Studies reveal that during the GFC, the subprime collateralized debt obligation (CDO) market was a major
driver in the transmission of volatility to the large complex financial institutions’ (LCFIs) equity returns (Longstaff,
2010; Calice, 2011). Calice (2011) finds the large complex financial institutions’ equity returns to be positively
correlated with the subprime assetbacked CDO market index returns. Raddatz (2010) finds that globally and within
countries, those banks relying heavily on non-deposit sources of funds experienced a substantial fall in stock returns.
Dumontaux and Pop (2012) examine the performance of disaggregated large banks and the
Table 1
Correlation results between LBs and each of the 10 sectors.
Sectors Before GFC (1994–2006) During GFC (2007–15 September 2008)
***
FIN 0.09 0.63***
IND 0.14*** 0.08
CS 0.03** 0.1**
MAT 0.04* 0.14***
UTI 0.03 0.15***
TS 0.02 0.23***
IT 0.07*** 0.15***
HC 0.05** 0.14***
ENG 0.02 0.24***
CD 0.07*** 0.21***
Notes: This table provides the correlation between the LBs’ price returns and each of the sectors index returns for the periods
before the GFC (1994–2006) and during the GFC (2007–15 September 2008). * Significant at 10% level. ** Significant at 5%
level.
***
Significant at 1% level.
4 How? Since share market sectors are found to be integrated, a shock from any sector may influence other sector returns (Wang et al., 2005).
‘‘non-bank’’ diversified financial industry and find contagion effects discriminatory toward the biggest financial firms
in the financial sector. The authors indicate that the impact of the LBs’ bankruptcy was limited to the largest financial
firms and significantly affected surviving ‘‘non-bank’’ financial services offering the same products (mortgage and
specialty finance, investment services and diversified financial services firms) with similar financial conditions, risk
profiles and characteristics, and that the components of the disaggregated diversified financial industry’s performance
(investment services and diversified financial services firms) were most significantly adversely affected from the LBs’
bankruptcy. In support, Pichardo and Bacon (2009) find the performance of investment firms (which are constituents of
the diversified financial industry), including those that had significant stakes in LBs, to be greatly adversely affected
from the LBs’ bankruptcy on and around the event date (15th September 2008). This suggests that LBs, being an
investment bank and a constituent of the diversified financial industry, would have been more closely associated with
other diversified financial firms than firms from the other three financial industries (banks, insurances and REITs). This
motivates the investigation of whether the diversified financial industry amongst other financial industries was the most
significantly adversely affected from the LBs’ bankruptcy.
Hypothesis2. The diversified financial industry’s performance is the most significantly adversely affected during the
LBs’ bankruptcy.
3. Methodology and data
3.1. Methodology
This paper employs an event study approach to examine the impact of the news announcement of the LBs’
bankruptcy on the share price returns performance of NYSE sectors and financial industries. Other studies that have
used event study methodology to examine single day events include Kryzanowski et al. (1995), Dumontaux and Pop
(2012), Pichardo and Bacon (2009), Raddatz (2010) and Mio and Fasan (2012). Kryzanowski et al. (1995) used it to
examine the impact of the Canadian stock market crash of 1987 on the performance of screen-sorted portfolios’
abnormal returns, volatility, and residual risk premium, while Dumontaux and Pop (2012), Pichardo and Bacon (2009)
and Raddatz (2010) used it to examine the impact of the LBs’ bankruptcy on the performance of financial firms. Mio
and Fasan (2012) used event study methodology to examine whether corporate social performance had any impact on
corporate financial performance due to the LBs’ bankruptcy. The authors analyzed the S&P 500 market index’s
constituent non-financial companies’ stock prices prior to and during the LBs’ bankruptcy announcement.
Furthermore, this paper uses an event study approach to examine both hypotheses as the US market is semi-strong
form efficient5 (see MacKinlay, 1997; Pichardo and Bacon, 2009). Therefore, NYSE security returns are anticipated to
be instantaneously reflective of the effects of the news announcement of the LBs’ bankruptcy on the firm’s value. This
paper uses daily returns to conduct the event study because Brown and Warner (1985) find the use of daily returns to be
more powerful than monthly returns for event study purposes. At the initial stage of conducting an event study, the
event along with the window over which the security prices will be observed needs to be defined (Campbell et al.,
1997). In this paper, the event date is defined as Monday 15 September 2008, the news announcement of the LBs’
bankruptcy (Dumontaux and Pop, 2012). This is represented by day ‘‘0’’ in this paper. Prior research using 15
September 2008 as the event date to examine the impact from the LBs’ bankruptcy (on the performance of financial
firms) include Pichardo and Bacon (2009), Dumontaux and Pop (2012) and Raddatz (2010). In this paper, the choice of
15 September 2008 as the event date is motivated by the following reasons. (1) Although LBs reported an enormous
loss of $4 billion on 10 September 20086 (Bartram and Bodnar, 2009), this is not chosen as the event date as the event
of 15 September 2008 stands out due to the extent and pace of its alarming consequences (Raddatz, 2010). On 15
September 2008, LBs had total assets of $639 billion, making it the largest failure in US history. This stimulates the
need to examine the stock market reaction to the catastrophic news of the immense failure of the largest fixed interest
security dealer, LBs. (2) It is the news announcement of the LBs’ bankruptcy on 15 September 2008 that triggered the
GFC, making it an event worth investigating. Despite the ongoing mortgage and banking crisis since early 2007, the
bankruptcy of LBs on 15 September 2008 marks the ‘‘real’’ anticlimax era in the stock market performance ( Bartram
and Bodnar, 2009). ‘‘September 15, 2008 has been proclaimed Wall Street’s worst day in seven years. The Dow Jones
Industrial average lost more than 500 points, more than 4%, which is the steepest fall since the day after the September
11th attacks’’ (Pichardo and Bacon, 2009). (3) The findings of this paper will be an extension to the findings of
5 Pichardo and Bacon (2009) find the US market semi-strong form efficient during the LBs’ bankruptcy.
6 This papers’ event window of [4, 0] trading days incorporates the effects of LBs’ huge loss reported on 10 September 2008.
Pichardo and Bacon (2009), Dumontaux and Pop (2012) and Raddatz (2010) with the use of a comprehensive sample
selection.
Additionally, in order to control for multiple negative news announcements around the LBs’ bankruptcy impairing
the variance estimates of abnormal return, 7 a shorter event window of 5 trading days is observed as opposed to the
typical lengths of 21–121 days (Peterson, 1989). Two such negative news announcements were the placement of
Fannie Mae and Freddie Mac into government conservatorship by the Federal Housing Finance Agency and the bailout
of the American International Group (AIG). Fannie Mae and Freddie Mac were put into government conservatorship by
the Federal Housing Finance Agency on Sunday, 7 September 2008 (Bartram and Bodnar, 2009) and the subsequent
day was 5 trading days prior to the LBs’ bankruptcy. On the other hand, AIG was bailed out on the day subsequent to
the event date (Bartram and Bodnar, 2009). In order to control for the aforementioned negative news announcements, 5
trading days prior to LBs’ bankruptcy and the days subsequent to the event date are not included in the event window.
The negative news announcements on LBs started 4 trading days prior to the bankruptcy (Bartram and Bodnar,
2009). On -4 trading days (9 September 2008) ‘‘Lehman Brothers shares plummet to lowest level on Wall Street in
more than a decade’’ (Bartram and Bodnar, 2009, p. 1280).8 On -3 trading days (10 September 2008), ‘‘Lehman
Brothers puts itself up for sale after reporting a $4 billion loss and says it will spin off its troubled commercial real
estate assets’’ (Bartram and Bodnar, 2009, p. 1280). On -1 trading days (12 September 2008), ‘‘with Lehman Brothers
facing collapse, US officials struggle to find a buyer for the distressed investment bank’’ (Bartram and Bodnar, 2009, p.
1280). On the event day, ‘‘12.30am EST: Lehman Brothers Holdings Incorporated files for Chapter 11 bankruptcy
protection. SEC Filing’’ (Bartram and Bodnar, 2009, p. 1281). Since negative news announcements on LBs dominated
the timeline of events for the period 4 trading days to the event date, (Bartram and Bodnar, 2009), the impact of the
LBs’ bankruptcy is analyzed for an event window of [4, 0] trading days.
Event study approaches typically use an estimation period immediately prior to the event window in predicting
normal period returns. Since the estimation period immediately prior to the event window of [4, 0] trading days was
exposed to a large number and a high frequency of events caused by the GFC, it is inappropriate to use an estimation
period during this time to predict normal period returns (see Dumontaux and Pop, 2012). Following Raddatz (2010), an
estimation period of 150 days prior to 30 June 2007 (22/11/2006–29/6/2007) is used to predict normal period returns
that would have eventuated in the absence of the GFC. The period before 30 June 2007 is assumed to be normal period.
Although the GFC started in August 2007 (Dumontaux and Pop, 2012), in July 2007 two Bear Stearns hedge funds
specializing in subprime debt filed for Chapter 15 bankruptcy and Countrywide Financial, one of the biggest mortgage
originators in the US, warned of ‘‘difficult conditions’’ (Raddatz, 2010).
According to MacKinlay (1997), the event study methodology prevalent today is essentially the same as that
introduced in the late 1960s in the seminal studies of Ball and Brown (1968) and Fama et al. (1969). Additionally,
MacKinlay (1997) warrants consideration for the use of multi-factor models in conducting event studies for firms that
are all members of the same industry. Therefore, this paper employs the Fama and French (1993) three factor model9 to
examine the performance of security returns at sector and financial industry level. In the estimation period, each of the
firm’s daily excess returns at time t is regressed on the market factor, size factor and book-to-market factor:
Rit R ft ¼ ai þbiðRmt R ftÞþ siSMBt þ hiHMLt þeit; (1)
where Rit is the actual realized return for firm i at time t; R ft is the daily return on one-month Treasury bills; R mt is the
value-weight return on all NYSE, AMEX, and NASDAQ stocks (from CRSP); SMB t is the difference between the
average return on the three small portfolios and the average return on the three big portfolios; HML t is the difference
between the average return on the two value portfolios and the average return on the two growth portfolios.
The estimated coefficients, the risk free rate and the realized market, size and book-to-market risk premiums during
the event window are used to compute the expected return for the event window [4, 0] trading days. Following this, the
7 As a robustness test, a longer 61-day event period as used by Pichardo and Bacon (2009) is also analyzed. However, during the 61-day event
period, there were multiple negative news announcements unrelated to LBs. Negative news announcements on LBs start from 4 trading days prior
to the LBs’ bankruptcy (see Bartram and Bodnar, 2009) and the CAAR results (which have not been reported to conserve space) show that the
financial sector, being the most exposed to LBs, had adverse cumulative returns from days 4 to 0. This supports the choice of this study’s 5 days
event window.
8 The sharp decline in LBs’ shares indicates that after Fannie Mae and Freddie Mac were put into government conservatorship by the Federal
Housing Finance Agency on Sunday, 7 September 2008 (Bartram and Bodnar, 2009), the market participants anticipated that LBs would be the
next troubled investment bank, which greatly affected the investor confidence amongst LBs shareholders.
9 The Fama et al. (1969) market model and market-adjusted returns model are employed to check the robustness of the results.
actual realized return (Rit) during the event window is compared with the predicted normal return based on the Fama
and French (1993) three factor model and the difference is known as abnormal return (AR it):
ARit ¼ Rit EðRitÞ; (2)
where ARit is the abnormal return for security i at time t, R it is the actual realized return for security i at time t, and
E(Rit) is the expected normal period return for security i at time t.
A positive (negative) abnormal return implies that the LBs’ bankruptcy had a positive (adverse) impact on the
performance of the security’s return. ‘‘The event study literature typically privileges the analysis of cumulative returns
because the cumulative impact of the events is easier to visualize’’ (Raddatz, 2010, p. 11). Also, negative news
announcements on LBs dominated the event window [4, 0] trading days (Bartram and Bodnar, 2009). Therefore, in line
with conventional event study reporting, this paper focuses on the evolution of average cumulative returns over the
event window of [4, 0] trading days. However, the daily average abnormal returns (AAR) on the event date are also
reported.
Table 2
Sample dataset.
Panel A: Sample selection procedures for each of the 10 sectors
Sectors Total firms Number of firms removed Ticker symbol of firms removed Firms remaining
CD 79 2 SNI, TWC 77
CS 41 4 DPS, LO, MJM, PM 37
Eng 39 1 SE 38
Fin 82 3 BRKb, CMF, DFS 79
HC 51 2 CFN, COV 49
Inds 62 - – 62
IT 72 3 MMI, V, TDC 69
Mats 30 - – 30
Uti 35 2 PEG, QEP 33
TS 8 1 PCS 7
Total 499 18 481
Panel B: Sample size for the financial industries
Industries Sample size
Banks 20
Diversified financials 21
Insurance 20
REIT 16 Total 771
Notes: This table details the sample used in this paper. Any firm with missing data during the estimated period or the event period was removed
from the sample to avoid biasness in the results. The final sample consists of a total of 481 firms grouped into 10 sectors and four financial
industries. 1 Amongst the 79 financial firms, only 77 could be classified into the four financial industries.
The AAR for each of the sectors and financial industries on any particular day t is computed as follows:
PNi¼1 ARit (3)

AARGt ¼
N
where N is the number of firms in the sector/financial industry, AR it is the abnormal return for security i at time t, and
AARGt is the average abnormal return for the sector/financial industry.
The AARGt is then accumulated through time to generate the cumulative average abnormal return (CAAR). The
CAAR for each sector and financial industry for any particular day t is computed as follows:
XT
CAARGt ¼ AARGt (4)
t¼T1
where CAARGt is the cumulative abnormal return for sectors/financial industries over a series of time during the event
window of [4, 0] trading days, T1 is the first period in which the AARGt are accumulated, and T2 is the last period in
which the AARGt are accumulated.
Finally, the ordinary cross-sectional approach (see Brown and Warner, 1980) is employed to compute the test
statistics for the AAR and CAAR.
3.2. Data
This study uses a disaggregated approach to examine the performance of NYSE sectors and financial industries
around the news announcement date of the LBs’ bankruptcy (referred to as the event date). The 9 March 2011 S&P 500
composition firm data list, which contained information on company name and ticker symbol, was downloaded from
Standard and Poor’s website.10 Each of the companies’ ticker symbols was used to download their respective closing
share price data from the Centre for Research in Security Prices database. Following this, each of the firms was
distributed into 10 sectors and 4 financial industries according to their corresponding Global Industry Classification
Standards sector classification (GICS). The 10 sectors are Consumer Discretionary (CD), Consumer Staples (CS),
Energy (Eng), Financials (Fin), Health Care (HC), Industrials (Ind), Information Technology (IT), Materials (Mat),
Utilities (Uti), and Telecommunication Services (TS). 11 Table 2 panel A details the sample selection procedures. Any
firm with missing data during the estimated period or the event period was removed from the sample to avoid bias in
the results. As a result, the sample used in this paper consists of a total of 481 firms 12: 77 firms in the CD sector, 37 in
CS, 38 in Eng, 79 in Fins, 49 in HC, 62 in Inds, 69 in IT, 30 in Mats, 33 in Uti, and 7 in the TS sector. The four
financial industries are: Banks, Diversified Financials, Insurances and Real Estate Investment Trusts (REIT). There
were 20 firms in Banks, 21 firms in Diversified Financials, 20 firms in Insurance and 16 firms in REIT. The daily Fama
and French factors data source is Wharton Research Data Services.
4. Discussion of findings
4.1. Findings for the 10 sectors
In this section, event study results for the 10 sectors are presented. The abnormal return performances of all 10
sectors were analyzed to determine whether the financial sector identified as the epicenter for the GFC (see Bartram
and Bodnar, 2009) was the most significantly adversely affected during the LBs’ bankruptcy. The findings of t-tests on
the analysis of AAR and CAARs per sector appear in Tables 3 and 4 respectively.
The main findings on the performance of the sectors based on the AAR and CAARs results are summarized as
follows. On the event date, eight sectors (CD, CS, Eng, Fin, HC, IT, TS, Uti) were significantly affected, while two
sectors (Ind and Mat) were insignificantly affected. Sectors are significantly affected at the 1% level with the exception
of Eng, Fin and HC, which have significance at the 5% level. Amongst the significantly affected sectors, the LBs’
bankruptcy had a positive impact on five sectors (CD, CS, HC, TS, Uti) and an adverse impact on only three sectors
(Eng, Fin, IT). The Fin sector AAR (2.11%) is most adversely affected, followed by IT (1.58%) and Energy (1.45%).
The CAAR for the [4, 0] trading days event window show that eight sectors were significantly affected (CS, Eng, Fin,
HC, Ind, IT, Mat, Uti) while two were insignificantly affected (CD, TS) by the LBs’ bankruptcy. Sectors are
significantly affected at the 1% level with the exception of HC and Ind, which have significance at the 5% and 10%
levels respectively. Amongst the eight significantly affected sectors, the LBs’ bankruptcy had an adverse impact on
only two sectors (Fin and IT). Fin is the most adversely affected (4.8% at 1% level of significance) followed by IT
(2.95% at 1% level). The AAR and CAAR results provide evidence in support of sector heterogeneity (see Narayan and
Sharma, 2011) by showing that not all sectors’ performance was significantly adversely affected by the LBs’
bankruptcy. During the LBs’ bankruptcy, the returns of sectors were affected differently.
Overall, the results provide evidence in support of my proposition that the financial sector is the most significantly
adversely affected by the LBs’ bankruptcy during the event window of [4, 0] trading days. On the event date, the Fin
sector has the highest negative AAR of 2.11%, significant at the 5% level. Additionally, the CAAR results show that
the financial sector is the only sector consistently adversely affected at the 1% level of significance over the multi day
10 LBs was listed on the NYSE and traded as part of the S&P 500 index prior to its bankruptcy. This motivated the choice of using the S&P 500
index data to analyze the impact of the LBs’ bankruptcy at the sector and financial industry levels.
11 Since the Consumer Services sector had only one firm, it was dropped from the analysis and only 10 sectors are analyzed in this study.
12 Under the MM, the sample consisted of 488 firms: 78 firms in the CD sector, 37 in CS, 39 in Eng, 81 in Fins, 50 in HC, 62 in Inds, 70 in IT,
30 in Mats, 33 in Uti, and 8 in the TS sector.
intervals of [4, 3], [4, 2], [4, 1] and [4, 0] trading days. Consequently, the Fin sector has the highest CAAR of 4.8%,
significant at the 1% level for the window of [4, 0] trading days. This implies that due to the strong degree of
correlation between LBs and the Fin sector 13 (see Table 1), negative LBs news announcements had the most significant
adverse impact on Fin sector performance. This also provides
13 LBs was significantly correlated with the Fin sector before the GFC (1994–2006) and during the GFC (2007–15 September 2008). LBs was
most significantly correlated with the Fin sector during the GFC.
ECOSYS-466;No.ofPages16
GModels
Table 3
Findings of t-tests on the analysis of AAR per sector based on the Fama and French (1993) three factor model.
Days Consumer Consumer Energy Financials Health care Industrials Information Materials Telecommunication Utilities
discretionary staples technology services
0.0117*** 0.016*** 0.0145** 0.0211** 0.0087** 0.0013 0.0158*** 0.0051 0.0597*** 0.0303***
0
(3.5356) (5.5419) (2.1923) (2.4775) (2.4636) (0.3273) (4.3348) (0.9296) (10.8131) (4.6216)
Notes: This table reports AAR for 10 sectors on the event date (15 September 2008) based on the Fama and French (1993) three factor model. t-Statistics are reported in parentheses. A positive sign implies a positive
impact from the event, while a negative sign implies an adverse impact from the event.
t-Statistics are based on the ordinary cross-sectional approach for significance testing. **
K.Ranjeeni/EconomicSystemsxxx(2014)xxx–xxx
***
9
10
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evidence in support of a semi-strong form of market efficiency by showing a direct relationship between the negative
news announcement on LBs and the price return performances of the Fin sector. 4.2. Findings for the financial
industries
In this section, event study results for the financial industries are presented. Findings of t-tests on the analysis of
AAR and CAARs per financial industry appear in Tables 5 and 6 respectively.
The main findings are summarized as follows. Further to the study by Narayan and Sharma (2011), this study
provides evidence on industry heterogeneity during the LBs’ bankruptcy. Although the performance of all financial
industries was adversely affected on the event date (depicted by negative AAR) and over the window of [4, 0] trading
days, not all financial industries’ performance was significantly adversely affected. On the event date, only diversified
financials and REIT performances were significantly adversely affected. The diversified financials AAR (3.53%) is
significantly affected at the 1% level of significance, followed by REIT (2.54%) at the 5% level of significance.
Additionally, the CAAR results for the [4, 0] window show that only diversified financials was significantly adversely
affected at the 1% level. The other three financial industries were insignificantly affected during the [4, 0] window.
This implies that although all financial industries were adversely affected during the LBs’ bankruptcy, the adverse
impact was not significant for all financial industries. In support, the findings of Dumontaux and Pop (2012) ‘‘suggest
that the observed contagious effects were rational/discriminating rather than panic-driven/undifferentiated and tend to
weaken the case for the bailout of Lehman Brothers’’.
Overall, the AAR and CAARs results show that the significant adverse impact was discriminatory toward the
diversified financial industry, which was most exposed to LBs. This provides evidence in support of my proposition
that the diversified financial industry’s performance was the most significantly adversely affected during the LBs’
bankruptcy. The diversified financial industry’s performance is the most significantly adversely affected at the 1% level
of significance not only on the event date (depicted by AAR) but also on a cumulative basis over the multi day intervals
of [4, 3], [4, 2], [4, 1] and [4, 0] trading days. This also provides evidence in support of a semi-strong form of market
efficiency by showing a direct relationship between the negative news announcement on LBs and the price return
performances of the diversified financial industry. Diversified financials is the only industry having consistent negative
CAAR significant at the 1% level over the window of [4, 0] trading days. This implies that since LBs was an
investment bank, negative news announcements on LBs greatly affected the confidence among the diversified financial
industry’s investors in comparison to other financial industries. In support, based on the market-adjusted model,
Dumontaux and Pop (2012) find the components of disaggregated diversified financial performance (investment
services and diversified financial services firm) to be most significantly adversely affected by the LBs’ bankruptcy.
Therefore, this study’s findings using the Fama and French (1993) three factor model and a larger sample
representation14 complement those of the study by Dumontaux and Pop (2012).
5. Robustness test
5.1. The market model
The Fama et al. (1969) market model is the most widely used approach for measuring abnormal returns (for related
studies, see Brown and Warner, 1985; Peterson, 1989; MacKinlay, 1997; Lee and Connolly, 2010; Chen and Lai,
2013). The market model (MM) is a more robust approach to event study in comparison to other statistical ( Brown and
Warner, 1985; Ritter, 1991; MacKinlay, 1997), nonregressive (Cable and Holland, 1996, 1999) and economic
approaches (MacKinlay, 1997). According to MacKinlay (1997), the OLS model is generally an efficient and
consistent means of estimating the MM parameters. The S&P 500 index is used as the market index (R mt). In the
estimation period (150 days prior to 30 June 2007), each of the firm’s share price returns at time t is regressed on the
concurrent
14 This study examines all four financial industries, namely, banks, diversified financials, REITs and insurances, from NYSE. On the other hand,
Dumontaux and Pop (2012) examined only disaggregated bank and non-bank financial institutions.
ECOSYS-466;No.ofPages16
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Table 4
Findings of t-tests on the analysis of CAARs per sector based on the Fama and French (1993) three factor model.
Window Consumer Consumer Energy Financials Health care Industrials Information Materials Telecommunication Utilities
discretionary staples technology services
4 0.0028 0.0178*** 0.035*** 0.0156*** 0.0082** 0.0049 0.0076** 0.0102 0.0017 0.0159***
(0.9834) (5.9099) (6.6946) (4.6643) (2.5718) (1.2847) (2.5158) (1.5339) (0.4111) (3.1952)
[4, 0.0027 0.0125*** 0.0042 0.0267*** 0.0052 0.0009 0.0091** 0.0046 0.0117 0.0219***
3] (0.7577) (4.0731) (0.6454) (5.819) (1.3986) (0.2413) (2.3937) (0.6647) (1.5546) (5.3071)
[4, 0.0001 0.0138*** 0.005 0.0265*** 0.0107** 0.0071 0.0121** 0.0073 0.0273** 0.0148***
2] (0.0247) (0.7184) (1.5898) (1.0675)
K.Ranjeeni/EconomicSystemsxxx(2014)xxx–xxx
(3.8185) (5.0299) (2.0333) (2.5139) (3.6967) (2.7972)
[4, 0.0104** 0.0134*** 0.0412*** 0.027*** 0.0078 0.014*** 0.0137*** 0.0355*** 0.0352** 0.0265***
1] (2.5062) (3.2816) (5.3947) (3.1821) (1.458) (2.6663) (2.7257) (4.9712) (3.3795) (5.6285)
[4, 0] 0.0013 0.0294*** 0.0266*** 0.048*** 0.0165** 0.0152* 0.0295*** 0.0406*** 0.0244 0.0568***
(0.2183) (5.5845) (2.7652) (2.9934) (2.384) (1.9588) (4.924) (4.4325) (1.711) (5.6677)
Notes: This table reports CAARs for 10 sectors based on the Fama and French (1993) three factor model. t-Statistics are reported in parentheses. A positive sign implies a positive impact from the LBs’ bankruptcy,
while a negative sign implies an adverse impact.
t-Statistics are based on the ordinary cross-sectional approach for significance testing. *
Significant at 10% level. **
***
11
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Table 5
Findings of t-tests on the analysis of AAR per financial industry based on the Fama and French (1993) three factor model.
Days Banks Diversified financials Insurance REIT
0 0.0071 (0.7228) 0.0353*** (3.4823) 0.0176 (0.5942) 0.0254** (2.6058)

Notes: This table reports AAR for financial industries on the event date (15 September 2008) based on the Fama and French (1993) three factor
model. t-Statistics are reported in the parentheses. A positive sign implies a positive impact from the LBs’ bankruptcy while a negative sign implies
an adverse impact.
t-Statistics are based on the ordinary cross-sectional approach for significance testing. **
Significant at 5% level. ***
Table 6
Findings of t-tests on the analysis of CAARs per financial industry based on the Fama and French (1993) three factor model.
Window Banks Diversified financials Insurance REIT
4 0.0131*** (3.0272) 0.0325*** (4.7899) 0.0133 (1.4931) 0.0021 (0.7601)

[4, 3] 0.037*** (4.5893) 0.0438*** (6.1192) 0.0131 (1.0855) 0.0053 (0.8615)
[4, 2] 0.0265** (2.5814) 0.0467*** (5.0415) 0.0236* (1.8252) 0.0001 (0.0205)
[4, 1] 0.0049 (0.5209) 0.0578*** (5.34) 0.0449 (1.6435) 0.0127 (1.7039)
[4, 0] 0.012 (0.7719) 0.0932*** (4.9774) 0.0625 (1.1069) 0.0127 (0.9101)
Notes: This table reports CAARs for financial industries based on the Fama and French (1993) three factor model. t-Statistics are reported in the
parentheses. A positive sign implies a positive impact from the LBs’ bankruptcy, while a negative sign implies an adverse impact.
t-Statistics are based on the ordinary cross-sectional approach for significance testing. *
Significant at 10% level. **
Significant at 5% level. ***
Significant at 1% level..
S&P 500 index returns. The estimated alpha ( aˆ i) and beta (bˆ i) coefficients from the regression are used to compute the
expected normal period return (E(Rit)) for each security at time t during the event window [4, 0]. The abnormal return for
each security at time t is computed using Eq. (2).
The standardized cross-sectional test proposed by Boehmer et al. (1991)15 is used to examine the statistical
significance of the AR’s results. Why? In this paper, the sample of securities is analyzed at sector and financial industry
levels. Therefore, there could be a high degree of cross-sectional dependence in the ARs arising from event date
clustering.17 Brown and Warner (1985) state that if securities are randomly selected in a sample, the one factor MM (as
used in this study) provides sufficient adjustment for dependence. However, ‘‘if instead the securities came from the
same industry group (as in this study), with clustering there could be a higher degree of cross-sectional dependence in
market model excess returns (abnormal returns) and measurable misspecification’’ (Brown and Warner, 1985, p. 22).
Nevertheless, Boehmer et al. (1991) provide evidence that the standardized cross-sectional test approach is robust 18 in the
presence of event date clustering as well
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K. Ranjeeni / Economic Systems xxx (2014) xxx–xxx 13
as event induced variances.16 In support, Harrington and Shrider, 2007 show that the standardized cross-sectional test
statistic suggested by Boehmer et al. (1991) is a good candidate for testing the significance of ARs.
15 The Boehmer et al. (1991) standardized cross-sectional test is a hybrid formed by combining the two approaches of standardized residuals
(Patell, 1976) and the ordinary cross-sectional method (see Brown and Warner, 1980). 17 This refers to securities of a sample suffering from other
close or simultaneous spacing of events during the event period apart from the event under investigation (Brown and Warner, 1980). For example,
Foster (1980) and Schwert (1981) discuss government regulation or mandated accounting procedures simultaneously affecting the performance of
numerous securities under examination during a particular event. 18 The standardized cross-sectional test approach adjusts for forecasted errors from
the estimation period. Such an adjustment controls for the misspecification that could result from even minor increases in variances caused by an
event causing too many false rejections of the null hypothesis of no abnormal return when it is in fact true (see Boehmer et al., 1991). Boehmer et
al. (1991) provide evidence that during the existence of event induced variances, the standardized cross sectional test performs better than other
commonly used approaches (ordinary cross-sectional test, standardized residuals test, sign tests and method of moments approach) of significance
testing. Accordingly, this study employs the standardized cross-sectional test to ensure that the rejection of the null hypothesis is done accurately.
16 There is evidence that the variance of stock returns increases for the days immediately around events, such as earnings announcements (e.g.,
Please cite this
Beaver, 1968; Patellarticle in press
and Wolfson, as: Brown
1979). Ranjeeni, K., Sectoral
and Warner and industrial
(1985) illustrate performance
how variance increase can during a stock market
cause misspecification crisis. tests
of hypothesis
Econ. Syst.
conducted (2014),
using standardhttp://dx.doi.org/10.1016/j.ecosys.2013.12.002
event study procedures.
The results17 are consistent with the main findings of this paper and show that the financial sector and the diversified
financial industry are most significantly adversely affected during the event window [4, 0].
5.2. Estimation period before the event period
Based on the Fama et al. (1969) market model, this paper also estimated normal period returns for all 10 sectors for a
longer event window of [30, +30] trading days (1/8/2008–23/1/2009) and an estimation window of 150 days
(27/12/2007–31/7/2008) immediately before the event period. The results show that on the event date, the financial sector
AAR is positive and insignificant (0.30%). This implies that the estimation period returns immediately prior to the event
period are highly contaminated by the volatility from negative news announcements during the GFC. Therefore, they are
not a good estimation parameter to predict normal period returns during the LBs’ bankruptcy. This supports this paper’s
and Raddatz’s (2010) approach of using an estimation period of 150 days prior to 30 June 2007 to forecast normal period
returns that would have eventuated in the absence of the GFC. 5.3. Market-adjusted returns model
As a further diagnostic check, the market-adjusted returns model is employed to estimate abnormal returns for each of
the 10 sectors and 4 financial industries during the event window [4, 0] trading days. Brown and Warner (1985) find that
for daily data, the market-adjusted return model works reasonably well in examining the impact of an event and is also
powerful in the presence of event date clustering. The market-adjusted return model is used in scenarios where ‘‘it is not
feasible to have a pre-event estimation period for the normal model parameters’’ (MacKinlay, 1997, p. 18). As discussed
in the methodology section and Section (5.2, since the GFC was a period characterized by high levels of volatility, an
estimation period immediately prior to the LBs event provided imprecise results. Accordingly, the market-adjusted return
model is used to check the robustness of this paper’s findings because it does not depend on past returns to forecast
normal period returns (Dumontaux and Pop, 2012).
Under the market-adjusted return model, the normal period return is the current event period market return. The
statistical significance of the AAR and CAARs are tested by employing the ordinary cross-sectional test approach (see
Brown and Warner, 1985).
Overall, the results21 support the main findings of this study and show that the financial sector and the diversified
financial industry are the most significantly adversely affected during the event window [4, 0].
6. Economic significance
This paper has established three things. (1) The impact of the LBs’ bankruptcy varied across sectors and financial
industries. (2) The financial sector and the diversified financial industry, which were the most exposed to LBs, were most
significantly adversely affected by the LBs’ bankruptcy. (3) The US market is semi-strong form efficient as there was a
direct relationship between negative news announcements on LBs and the performance of the financial sector and
diversified financial industry returns over the event window [4, 0]. The question that then follows is how an investor can
utilize these findings to devise a profitable trading strategy. This paper proposes for investors to short sell
Table 7
Findings on the average abnormal return from short selling.
Average t-Statistic
R4,0
Financial sector 0.0566*** 3.6536

Diversified financials industry 0.0883*** 5.5483
Notes: This table reports the average abnormal return from short selling on day 4 followed by a short covering on
day 0, referred to as R4,0 (the negative of the [4, 0] window’s average BHAR). t-Statistics are based on the ordinary
cross-sectional approach for significance testing.
***
Significance at 1% level.
those sectors or industry’s securities that are anticipated to be the most significantly adversely affected by a particular
negative news announcement. In this paper, an average buy-and-hold abnormal return (BHAR) technique is used to test
this proposition on the financial sector and the diversified financial industry’s securities.
21
17 To conserve space, only the main findings are discussed. However, the results can be made available upon request. To conserve space, only
the main findings are discussed. However, the results can be made available upon request.
Please cite this article in press as: Ranjeeni, K., Sectoral and industrial performance during a stock market crisis. Econ.
Syst. (2014), http://dx.doi.org/10.1016/j.ecosys.2013.12.002
14Models
Following Trueman et al. (2003), the average BHAR for the financial sector and diversified financial industry’s
security is computed by firstly compounding each security’s raw returns over the [4, 0] event window. Subsequently, the
S&P 500 index (market index) is compounded over the [4, 0] window and subtracted from each of the security’s
compounded raw returns. Lastly, the ARs are averaged across all securities within the financial sector and the diversified
financial industry. The test statistics for the average BHAR over the [4, 0] window is based on its corresponding cross-
sectional standard error (see Barber and Lyon, 1997; Trueman et al., 2003). The negative of the average BHAR over the
[4, 0] window provides the AAR from short selling during this window.
The findings on the AAR from short selling for the financial sector and the diversified financial industry’s security
are presented in Table 7.
The AAR from a short sale on day 4 followed by a short covering on day 0, referred to as R 4,0 (the negative of the
average BHAR over the [4, 0] window) is a significant 5.66% for the financial sector and 8.83% for the diversified
financial industry. Both the financial sector and the diversified financial industry’s AAR are significant at the 1% level.
This implies that during the LBs’ bankruptcy those investors who engaged in the short-selling of financial sector and
diversified financial securities over the [4, 0] window would have benefited. In support, Bartram and Bodnar (2009, p.
1281) state that on 17 September 2008 ‘‘reports emerge that regulators are probing the practice of ‘naked’ short sellers.
The SEC announces a temporary emergency ban on short selling in the stocks of all companies in the financial sector’’.
This implies that the short selling of financial sector securities as discussed in this paper was profitable during the LBs’
bankruptcy.
7. Conclusion
Motivated by Narayan and Sharma’s (2011) findings on sector and firm heterogeneity, this paper examines the impact
of the news announcement of the LBs’ bankruptcy on the performance of NYSE sectors and financial industries. The
main contribution of this study is that it provides evidence that sectors behave heterogeneously during a crisis and
unravels that the significant adverse impact from the LBs’ bankruptcy is discriminatory toward the financial sector and
the diversified financial industry that were most exposed to LBs. This paper proposes for investors to short sell those
sectors or industry’s securities that are anticipated to be the most significantly adversely affected by a particular negative
news announcement.
This paper unravels three new findings during the LBs’ bankruptcy. (1) This paper provides evidence that the impact
from the LBs’ bankruptcy varied across sectors and financial industries. On the event date and over the [4, 0] trading
days window, being the period over which most negative news on LBs was released, not all sectors and financial
industries’ performance was significantly adversely affected. Although all financial industries were adversely affected on
the event date and over the [4, 0] event window, not all financial industries were significantly adversely affected. (2) This
paper finds negative news on the LBs’ bankruptcy having the greatest adverse impact on the
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K. Ranjeeni / Economic Systems xxx (2014) xxx–xxx 15
performance of the financial sector and the diversified financial industry (both were most exposed to LBs) in comparison
to other sectors and financial industries. The financial sector and the diversified financial industry’s performance were
significantly adversely affected not only on the event date but also over the [4, 0] event window. (3) This paper shows
that investors who engaged in the short sale of financial sector and diversified financial securities over the [4, 0] window
would have benefited. The AAR from a short sale on day-4 followed by a short covering on day 0 is a significant (at 1%
level) 5.66% for the financial sector and 8.83% for the diversified financial industry.
Finally, this study used an event study approach to analyze the performance of sectors and financial industries during
the LBs’ bankruptcy. At any particular time period, security prices are affected by various news announcements or
events. However, under the event study approach, the abnormal performance of firms during the event period is
attributed only to the event under investigation. This is a limitation not only of this study but generally the limitation of
the event study paradigm. Nevertheless, in event studies, it is a common practice to gather a sufficiently large sample of
firms experiencing the event to ensure that the single commonality among the firms is the event. Consequently, other
random factors are canceled and the statistical tests appropriately reflect the impact of the event under investigation.
Also, in this paper all necessary measures were taken to ascertain reliable results under conditions of event-induced
variances. First, the Fama and French (1993) model was used to perform analysis and the most popular MM along with
the market-adjusted model were used to check the robustness of the results. Second, for the MM, the robust hybrid
Boehmer et al. (1991) standardized cross-sectional test was conducted to ensure that hypothesis testing is performed
correctly.
Acknowledgments
I would like to sincerely thank Alfred Deakin Prof. Paresh Kumar Narayan, Prof. Joakim Westerlund, Dr. Huson Ali
Ahmed, Dr. Kannan Thuraisamy, Dr. Sagarika Mishra and Dr. Susan Sharma from the Centre for Financial
Econometrics, Deakin University for their constructive comments and overwhelming support on earlier versions of this
paper. I am also very grateful to the participants at the internationally refereed Global Accounting, Finance and
Economics Conference that was held in Melbourne in February 2012 for their useful comments. Special thanks to Dr.
Rohitash Chandra (The University of the South Pacific) and Mr. Dharmendra Naidu (The University of the South
Pacific) for their helpful feedback. I also thank God for his guidance and my family for their continuous moral support in
the completion of this paper.
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ECOSYS-466; No. of Pages 16

Economic Systems xxx (2014) xxx–xx

Contents lists available at ScienceDirec

Sectoral and industrial performance during a stock market

* Tel.: +61 410199805.

Dumontaux and Pop, 2012; Chong, 2011).

http://dx.doi.org/10.1016/j.ecosys.2013.12.002 0939-3625/ 2014

3. Methodology and data

Rit R ft ¼ ai þbiðRmt R ftÞþ siSMBt þ hiHMLt þeit; (1)

ARit ¼ Rit EðRitÞ; (2)

Panel A: Sample selection procedures for each of the 10 sectors

Panel B: Sample size for the financial industries

Industries Sample size

PNi¼1 ARit (3)

4.1. Findings for the 10 sectors

5.1. The market model

Days Banks Diversified financials Insurance REIT

0 0.0071 (0.7228) 0.0353*** (3.4823) 0.0176 (0.5942) 0.0254** (2.6058)

4 0.0131*** (3.0272) 0.0325*** (4.7899) 0.0133 (1.4931) 0.0021 (0.7601)

K. Ranjeeni / Economic Systems xxx (2014) xxx–xxx 13

5.2. Estimation period before the event period

Financial sector 0.0566*** 3.6536

K. Ranjeeni / Economic Systems xxx (2014) xxx–xxx 15

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0 0.0071 (0.7228) 0.0353* (3.4823) 0.0176 (0.5942) 0.0254 (2.6058)

4 0.0131* (3.0272) 0.0325* (4.7899) 0.0133 (1.4931) 0.0021 (0.7601)