A New Approach to Measuring Financial Contagion
AbstractThis article proposes a new approach to evaluate contagion in financial markets. Our measure of contagion captures the coincidence of extreme return shocks across countries within a region and across regions. We characterize the extent of contagion, its economic significance, and its determinants using a multinomial logistic regression model. Applying our approach to daily returns of emerging markets during the 1990s, we find that contagion is predictable and depends on regional interest rates, exchange rate changes, and conditional stock return volatility. Evidence that contagion is stronger for extreme negative returns than for extreme positive returns is mixed. Copyright 2003, Oxford University Press.
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Bibliographic InfoArticle provided by Society for Financial Studies in its journal The Review of Financial Studies.
Volume (Year): 16 (2003)
Issue (Month): 3 (July)
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- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
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