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A wavelet-based approach to test for financial market contagion

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  • Gallegati, Marco

Abstract

A wavelet-based approach to test whether contagion occurred during the US subprime crisis of 2007 is proposed. After separately identifying contagion and interdependence through wavelet decomposition of the original returns series, the presence of contagion is assessed using a simple graphical test based on non-overlapping confidence intervals of estimated wavelet coefficients in crisis and non-crisis periods. The results indicate that all stock markets have been affected by the US subprime crisis and that Brazil and Japan are the only countries in which contagion is observed at all scales.

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Bibliographic Info

Article provided by Elsevier in its journal Computational Statistics & Data Analysis.

Volume (Year): 56 (2012)
Issue (Month): 11 ()
Pages: 3491-3497

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Handle: RePEc:eee:csdana:v:56:y:2012:i:11:p:3491-3497

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

Related research

Keywords: Wavelet decomposition; Contagion; Interdependence; Wavelet correlation;

References

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Citations

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Cited by:
  1. Gallegati, Marco & Ramsey, James B. & Semmler, Willi, 2014. "Interest rate spreads and output: A time scale decomposition analysis using wavelets," Computational Statistics & Data Analysis, Elsevier, vol. 76(C), pages 283-290.
  2. Reboredo, Juan C. & Rivera-Castro, Miguel A., 2014. "Wavelet-based evidence of the impact of oil prices on stock returns," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 145-176.
  3. Zied Ftiti & Aviral Tiwari & Amél Belanès, 2014. "Tests of Financial Market Contagion- Evolutionary Cospectral Analysis V.S. Wavelet Analysis," Working Papers 2014-062, Department of Research, Ipag Business School.
  4. Reboredo, Juan Carlos & Rivera-Castro, Miguel A. & Zebende, Gilney F., 2014. "Oil and US dollar exchange rate dependence: A detrended cross-correlation approach," Energy Economics, Elsevier, vol. 42(C), pages 132-139.
  5. Jozef BARUNÍK & Lukáš VÁCHA, 2013. "Contagion among Central and Eastern European Stock Markets during the Financial Crisis," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 63(5), pages 443-453, November.
  6. Reboredo, Juan C. & Rivera-Castro, Miguel A., 2013. "A wavelet decomposition approach to crude oil price and exchange rate dependence," Economic Modelling, Elsevier, vol. 32(C), pages 42-57.

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