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Testing the Hypothesis of Contagion Using Multivariate Volatility Models

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  • Marçal, Emerson Fernandes
  • Pereira, Pedro L. Valls

Abstract

The aim of this paper is to test whether or not there was evidence of contagion across the various financial crises that assailed some countries in the 1990s. Data on sovereign debt bonds for Brazil, Mexico, Russia and Argentina were used to implement the test. The contagion hypothesis is tested using multivariate volatility models. If there is any evidence of structural break in volatility that can be linked to financial crises, the contagion hypothesis will be confirmed. Results suggest that there is evidence in favor of the contagion hypothesis.

Suggested Citation

  • Marçal, Emerson Fernandes & Pereira, Pedro L. Valls, 2008. "Testing the Hypothesis of Contagion Using Multivariate Volatility Models," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 28(2), November.
    • Handle: RePEc:sbe:breart:v:28:y:2008:i:2:a:1511
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    2. Rafał SIEDLECKI & Daniel PAPLA, 2016. "Conditional Correlation Coefficient As A Tool For Analysis Of Contagion In Financial Markets And Real Economy Indexes Based On The Synthetic Ratio," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 50(4), pages 287-299.
    3. Carvalho, João Vinícius de França & Chiann, Chang, 2013. "Redes Bayesianas: Um método para avaliação de interdependência e contágio em séries temporais multivariadas," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 67(2), June.
    4. de Oliveira, Felipe A. & Maia, Sinézio F. & de Jesus, Diego P. & Besarria, Cássio da N., 2018. "Which information matters to market risk spreading in Brazil? Volatility transmission modelling using MGARCH-BEKK, DCC, t-Copulas," The North American Journal of Economics and Finance, Elsevier, vol. 45(C), pages 83-100.
    5. Boubaker, Heni & Raza, Syed Ali, 2016. "On the dynamic dependence and asymmetric co-movement between the US and Central and Eastern European transition markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 459(C), pages 9-23.
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    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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