Effects of the GFC and COVID-19 on U.S. Financial Indicators: An Integrated Short-Term Econometric Approach

Abstract

The 2008 Global Financial Crisis (GFC) and the 2020-2021 COVID-19 pandemic disrupted financial markets, causing volatility, liquidity issues, and shifts in investor behavior. This study analyzes the immediate impacts and recoveries of these events, comparing their characteristics and the effectiveness of policy responses. An event study methodology and a GARCH approach are applied. Results show that -in the GFC Crisis- Lehman Brothers bankruptcy has greater negative impact than the first date of subprime mortgages bad news. In the COVID-19 crisis, closures and vaccines announcements has greater impact than the first COVID-19 case date in US. Also, the GFC Crisis decreased the valuation levels of key financial indicators as equal as the COVID-19, but this last was less volatility pronounced. These results highlight the importance of timely and effective public policy interventions to mitigate the adverse effects of such crises on financial markets.