The effect of the 2008 financial crisis on Morroccan stock market using models

Abstract

This study aims to investigate the effect of the 2008 crisis on Moroccan stock market, using asset pricing models, knowing the Capital Asset Pricing Model (CAPM), Fama and French three-factor model, and the Carhart’s four-factor model. These multi-factors models were tested for the period starting 2005 to 2012 and giving much more importance to sub-period related to the crisis event. For that, we sorted portfolios based on firm’s characteristics, structure and performance, we calculated the premiums related to these models, and run time series regressions in order to study the explanatory power of each independent variable. After that, we used the chow test to validate the break-in time related to the Global Financial Crisis. We found that the Carhart’s four-factor model capture the return stocks in CSE better than the other two models; also, reaction to the financial crisis is as expected for some factors and take a longer time to readjust for others. We conclude that the results are highly dependent on portfolios selection and sub-period related to the crisis.