Financial Risks and Stock Market Crashes: An Empirical Analysis of the Tunisian Stock Market

Abstract

This study aims to investigate the effect of financial risks on the stock market crashes occurrence from 1999 to 2020. Using the windows method, we detect two stock market crises in the Tunisian stock market. Based on the probit model, we find evidence that low stock return risk, low EUR/TND exchange rate risk, high interest rate risk, high credit risk and high liquidity risk increase the occurrence probability of stock market crashes. Our results suggest that the decrease in volatility, particularly in equity and exchange market, the increase in volatility in interest rate, the credit rating downgrades issued by Moody’s and the low liquidity market contribute to crashes in the Tunisian stock market. In summary, financial risks, which are the market risks, the credit risk and the liquidity risk could be leading indicators of crashes in the Tunisian stock market.
 Keywords: Stock market crashes; Liquidity risk; Credit risk; Market risks.

Borsa İstanbul’da Mevsimsel Duygulanım Bozukluğu

“…The remaining studies have focused on the single stock markets. Bhattarai & Joshi (2007) and Hammami & Abaoub (2011) investigated the SAD effect on Nepalese and Tunisian stock markets, respectively, and they could not find a significant impact. In contrast, Stefanescu & Dumitriu (2011) and Murgea (2016) concentrated on the Romanian stock market, divided the period according to economic crises and they both found a substantial effect of SAD.…”

“…The SAD effect starts at the beginning of autumn (the 21 st of September) and decreases until the end of the winter (the 21 st of March). The effect is more apparent in countries with extreme latitudes, such as Sweden and Australia (Hammami & Abaoub, 2011;Kamstra et al, 2003).…”