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Review of Quantitative Finance and Accounting

, Volume 42, Issue 2, pp 293–308 | Cite as

The aftermath of the subprime crisis: a clustering analysis of world banking sector

  • José G. Dias
  • Sofia B. Ramos
Original Research

Abstract

The banking sector has been on the spotlight in both academic and policy circles since the outburst of the subprime bubble. The crisis has its roots in the US, but there were spillover effects around the world. We study the behavior of the banking sector of 40 countries during the period 2007–2010, using a new clustering methodology. Our methodology combines regime switching models in the modeling of longitudinal variations with cluster analysis that identifies groups of countries with similar profiles. Our results show that although there were periods of intense contagion, the impact was uneven among sample countries. The crisis had episodic effects on some countries, while others had severe devaluations after the Lehman Brothers bankruptcy. Finally, a small group of banking systems has plunged into a long severe crisis.

Keywords

Banking sector Clustering methods Time series data Regime switching models Hidden Markov model 

JEL Classification

G21 C34 C38 

Notes

Acknowledgments

The authors would like to thank the Fundação para a Ciência e a Tecnologia (Portugal) for its financial support (Grant PTDC/EGE-GES/103223/2008). We also thank the Editor and an anonymous reviewer for their suggestions.

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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Business Research Unit (BRU-IUL)Instituto Universitário de Lisboa (ISCTE-IUL)LisbonPortugal

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