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The Financial Crisis of 2007: Parametric and Non-Parametric Approaches

The Financial Crisis of 2007: Parametric and Non-Parametric Approaches

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The Financial Crisis of 2007: Parametric and Non-Parametric Approaches

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  1. The Financial Crisis of 2007: Parametric and Non-Parametric Approaches Stuart Brown

  2. Project Description • Financial Crisis of 2007: how did the crisis play out statistically? • Compare differences in the 4 U.S. Census Regions • South, North East, West, Mid-West • Consumer Sentiment: what effect economic variables had during the crisis

  3. Financial Crises • Characteristics of Crisis: • Drop in Asset Prices, Financial Firm Failures, Flight to Liquidity and Low Risk, Difficulty Obtaining Credit • Precursors: • Asset Price Bubble/Leverage Buildup • Real estate, Stock Prices • Debt Buildup • Factors • Innovation and Liberalization, Credit Booms • Asset Price Boom and Bust

  4. Variations Across Regions • 4 U.S. Census Regions • South, NE, West, Mid-West • Variables Of Note: • Housing Starts • Unemployment • Labor Force • Hires • Openings • Housing Prices

  5. Housing Starts

  6. Unemployment

  7. Labor Force

  8. Hires

  9. Openings

  10. Housing Sales Price

  11. One Way ANOVA vs. Kruskall-Wallis • Null Hypotheses: No treatment effects, all Tau’s are Equal • General Alternative: Not all Tau’s are equal • T1=South • T2=NE • T3=W • T4=MW

  12. Conclusions: • Kruskall-Wallis Procedure: • Conclude not all Tau’s equal for • Housing Starts, Labor Force, Hires, Openings, Sale Price • No Diff: Unemployment Same conclusions found when using One-Way ANOVA

  13. Housing Starts • Multiple Comparisons K-W • NE-MW, MW-W • Tukey-Kramer Multiple Comparisons

  14. Unemployment • KW: • No Diffs • Tukey-Kramer

  15. Labor Force • KW • All significantly different • Tukey-Kramer

  16. Hires • KW • Not Different: Midwest and West • Tukey-Kramer

  17. Openings • KW: • Sig Diffs: NE-W, NE-S, MW-S, W-S • Tukey-Kramer

  18. Housing Prices • KW: • Sig Diffs: NE-MW, NE-S, MW-W, W-S • Tukey-Kramer:

  19. Associations: Consumer Sentiment • Variables “associated” with Consumer Sentiment: • Consumer Price Index • Total Consumer Credit • Unemployment • S&P 500 Index • Personal Consumption Expenditure • M2 Money Stock • Housing Starts • Labor Force • Disposable Personal Income • Home Price Index

  20. Kendall and Pearson Test Conclusions • CPI: significant association (-) • Total Consumer Credit: significant association (-) • Unemployment: no significant association • S&P 500: Significant association (+) • Personal Consumption Exp: no significant association • M2 Money Stock: Significant association (-) • Housing Starts: Significant association (+) • Labor Force: Significant association (-) • Income: significant association* (-) (Pearson test shows no association) • Home Price Index: Significant association (+)

  21. General Regression

  22. General Regression 2