Financial crises and the global value premium: Revisiting Fama and French

• We examine the impact of financial contagion resulting from global financial crises based on analyses of the global value premium.
• We propose a new model that is a composite of the asymmetric GARCH model and the Fama–French two factor model.
• Results show that equity markets become more integrated after financial crises that exhibit global effects but less integrated after crises that exhibit regional effects.
• Overall findings support the risk story of the global value premium.

This paper examines the impact of financial contagion resulting from global financial crises based on analyses of the global value premium as represented by thirteen countries. We propose a new model that is a composite of the asymmetric GARCH model and the Fama–French two factor model. Then we investigate behavior of the value premium within crisis periods as well as behavior for pre-crisis, crisis and post-crisis periods. Results show that equity markets become more integrated after financial crises that exhibit global effects but less integrated after crises that exhibit regional effects. Overall findings support the risk story of the global value premium.