Impact of Price Indexes on Stock Market Prices of Banks in Financial Crises

Abstract

During times of crises, stock markets often experience heightened volatility, and the banking sector is particularly susceptible. This study aims to investigate the impact of index values on the daily closing prices of five banks during five major financial crises in recent decades, using logistic regression analyses. The results show that in five crisis periods, different indexes have a significant impact on the daily stock price of banks. Although there is no pattern found for different crisis periods because each bank has different investment instruments, the index, ind38- CFMRC (VWI) Over $2, seems to have a highly significant impact on the crisis periods I-IV and ind37- CFMRC (DEWI) Over $2 plays a significant role in predicting the outcomes. The findings indicate that banks should give particular focus to their investment instruments, particularly value-weighted indexes (VWI) over $2 and equal-weighted indexes (DEWI) over $2 when any indications of a crisis arise. This is crucial because these index values influence the daily closing prices of banks and could potentially contribute to economic crises. Moreover, larger banks are more sensitive to changes in the index values than smaller banks, attributed to variations in their investment amounts.