The Spreading of Financial Crisis: Effect of Investor Behavior or of Economic Channels

• Main Authors: Ruxandra Vilag, Dragos Ungureanu, George Ionescu, M. Rizea
• Format: Article
• Language: English
• Published: Danubius University 2011-05-01
• Series: EIRP Proceedings
• Subjects: financial crisis; investor behavior; linkages
• Online Access: http://www.proceedings.univ-danubius.ro/index.php/eirp/article/view/785/712

Objectives It’s very important to quantify the influence of various factors in the development offinancial crisis. Once these factors can be determined we can attempt to stop this phenomenon or at leastminimize its effects. Prior Work Previous studies have shown that the phenomenon of globalization makesextremely disturbing phenomena quickly transmitted from one market to another, provided that these marketswill be connected. But what is the explanation when countries not linked in any way react in same way at theappearance of disturbances in one of the country? Approach We study the phenomenon of contagion bycomparing the economy and financial market evolution, in Romania, during the last global financial crisis.Results We can conclude that the Romanian market actually reacts to the behavior of investors while the inthe real economy effects are felt much later and/or have a weaker intensity. Implications For investors it’simportant to follow their expectations of the market evolution much more than the current economicconditions. Value Knowing the influence of various factors in the evolution of financial markets we willknow what steps must be taken so that these crises will not be felt in the real economy or their impact will bereduced.