Financial contagion across G10 stock markets: A study during major crises

The multiple financial crises that occurred during the last two decades have stimulated scholars to investigate the cross‐market linkages and how shocks are transmitted across borders. Researchers usually examine financial contagion and its effects during a single period of study based on static models. This paper employs a regular vine copula specification to model the dependence dynamics across the G10 stock markets, by analysing the impacts during tranquillity periods and during each crisis episode studied apart. Empirical findings show significant differences in the connectedness, with distinctive shock transmission paths during every sub‐period. The results suggest a strong evidence of contagion during the global financial crisis and the European sovereign debt crisis. However, during the market downturn of 2002, there was no significant contagion due to the lack of market integration then. Besides, in the aftermath of the Brexit vote, Eurozone members took measures to reduce possible shock transmission and eliminate contagion.