Investing against the wind: contagion during the recent financial crisis

This article examines the effect of Warren Buffett's investment in Goldman Sachs on 24 September 2008, during the subprime mortgage crisis. Although this event is arguably perceived to be the biggest expression of confidence in the financial market during the crisis, by conducting event studies...

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Bibliographic Details
Published in:	Applied economics 2016-12, Vol.48 (59), p.5824-5833
Main Authors:	Lu, Liping, Wang, Chunyang
Format:	Article
Language:	eng
Subjects:	abnormal return Abnormal returns Buffett, Warren Economic crisis Economic models event studies Financial contagion financial crisis Goldman Sachs Group Inc International finance Investment bankers Investments United States
Online Access:	Get full text
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Summary:	This article examines the effect of Warren Buffett's investment in Goldman Sachs on 24 September 2008, during the subprime mortgage crisis. Although this event is arguably perceived to be the biggest expression of confidence in the financial market during the crisis, by conducting event studies, we do not find the major counterparties of Goldman Sachs displayed positive abnormal returns. Moreover, the abnormal return is not significantly related to the counterparty connection. We have similar findings on these financial institutions' default probabilities using credit default swap.
ISSN:	0003-6846 1466-4283