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Multivariate contagion and interdependence

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Author Info

  • Baur, Dirk G.
  • Fry, Renée A.

Abstract

This paper proposes a multivariate test to measure the statistical and economic significance of contagion through analysis of extreme unobserved common shocks. Contagious episodes are endogenously determined with no need, but the possibility, to specify the source country. Application to a panel of equity returns during the Asian crisis of 1997-1998 finds that interdependencies are substantially more important than contagion. However, the periods of contagion evident show that it is short-lived, split between positive and negative movements and reverses quickly. In comparison to other Asian crisis countries, Hong Kong is the main driver of contagion in the crisis. The proposed methodology and the empirical findings provide a more detailed picture of contagion than commonly applied tests.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Asian Economics.

Volume (Year): 20 (2009)
Issue (Month): 4 (September)
Pages: 353-366

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Handle: RePEc:eee:asieco:v:20:y:2009:i:4:p:353-366

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Web page: http://www.elsevier.com/locate/asieco

Related research

Keywords: Contagion Panel data Fixed time effects Asian crisis Endogenous crisis period Asymmetries;

References

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Citations

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Cited by:
  1. Kamil Yilmaz, 2009. "Return and Volatility Spillovers among the East Asian Equity Markets," Koç University-TUSIAD Economic Research Forum Working Papers 0907, Koc University-TUSIAD Economic Research Forum.
  2. Dirk G Baur, 2012. "The Structure and Degree of Dependence - A Quantile Regression Approach," Working Paper Series 170, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
  3. Yushi Yoshida, 2010. "Is this time different for Asia?: Evidence from stock Markets," Discussion Papers 40, Kyushu Sangyo University, Faculty of Economics.
  4. Sandoval, Leonidas & Franca, Italo De Paula, 2012. "Correlation of financial markets in times of crisis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(1), pages 187-208.
  5. Korkmaz, Turhan & Çevik, Emrah İ. & Atukeren, Erdal, 2012. "Return and volatility spillovers among CIVETS stock markets," Emerging Markets Review, Elsevier, vol. 13(2), pages 230-252.
  6. Nistor, Costel & Dumitriu, Ramona & Stefanescu, Razvan, 2012. "Impact of the global crisis on the linkages between CAC 40 and indexes from CEE countries," MPRA Paper 42511, University Library of Munich, Germany, revised 18 Sep 2012.
  7. Renée Fry & Cody Yu-Ling Hsiao & Chrismin Tang, 2011. "Actually This Time Is Different," CAMA Working Papers 2011-12, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  8. Mierau, Jochen O. & Mink, Mark, 2013. "Are stock market crises contagious? The role of crisis definitions," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 4765-4776.
  9. Baur, Dirk G., 2012. "Financial contagion and the real economy," Journal of Banking & Finance, Elsevier, vol. 36(10), pages 2680-2692.
  10. Grigoryev, Ruslan & Jaffry, Shabbar & Marchenko, German, 2012. "Investigation of the consequences of ignoring daily data non-synchronism in cross-market linkages: BRIC and developed countries," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 26(2), pages 92-112.
  11. Abdulnasser Hatemi-J & Eduardo Roca, 2010. "The Impact of the US Real Estate Market on Other Major Markets During Normal and Crisis Periods," Discussion Papers in Finance finance:201003, Griffith University, Department of Accounting, Finance and Economics.
  12. Guyot, Alexis & Lagoarde-Segot, Thomas & Neaime, Simon, 2014. "Foreign shocks and international cost of equity destabilization. Evidence from the MENA region," Emerging Markets Review, Elsevier, vol. 18(C), pages 101-122.
  13. Leonidas Sandoval Junior & Italo De Paula Franca, 2011. "Correlation of financial markets in times of crisis," Papers 1102.1339, arXiv.org, revised Mar 2011.

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