The Impact of Lehman Brothers’ Bankruptcy on the Banking System During the Subprime crisis

The Impact of Lehman Brothers’ Bankruptcy on the Banking System During the Subprime crisis | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article The Impact of Lehman Brothers’ Bankruptcy on the Banking System During the Subprime crisis Henda HENDA Rajhi This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-8318017/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract In this article, we applied the DCC-GARCH model developed by Cappiello, Engle, and Sheppard (2006) to analyze the predictability of correlations among bank stock returns, particularly during the subprime crisis. This approach enabled us to examine the dynamics of conditional correlations between various financial institutions and evaluate the impact of Lehman Brothers’ bankruptcy on the U.S. banking system. Our primary goal was to determine whether the DCC- GARCH model could effectively capture these dynamics and to identify the banks most affected by Lehman Brothers’ collapse. The results revealed that the conditional correlations between Lehman Brothers and other banks were dynamic, with all sampled banks being significantly impacted by the event on September 15, 2008. A notable and temporary increase in correlations was observed, supporting the contagion hypothesis. Even banks that had not shown high correlations with Lehman Brothers prior to its bankruptcy were affected, with the effect being more pronounced for banks located in the same state, while geographically distant banks exhibited relative resilience to the contagion. Finance Subprime crisis DCC-GARCH Dynamic conditional correlations Banking contagion Lehman Brothers’ bankruptcy Full Text Additional Declarations The authors declare no competing interests. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-8318017","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":557651035,"identity":"a19909c1-f60c-4e38-8979-c558168a5480","order_by":0,"name":"Henda HENDA 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crisis\u003c/strong\u003e\u003c/h1\u003e","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":true,"hideJournal":true,"highlight":"","institution":"aucun","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"Subprime crisis, DCC-GARCH, Dynamic conditional correlations, Banking 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This approach enabled us to examine the dynamics of conditional correlations between various financial institutions and evaluate the impact of Lehman Brothers\u0026rsquo; bankruptcy on the U.S. banking system. Our primary goal was to determine whether the DCC- GARCH model could effectively capture these dynamics and to identify the banks most affected by Lehman Brothers\u0026rsquo; collapse.\u003c/p\u003e\u003cp\u003eThe results revealed that the conditional correlations between Lehman Brothers and other banks were dynamic, with all sampled banks being significantly impacted by the event on September 15, 2008. A notable and temporary increase in correlations was observed, supporting the contagion hypothesis. 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