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Contagion Effects of the Subprime Crisis in the European Nyse-Euronext Markets

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Author Info
Paulo Horta (Comissão do Mercado de Valores Mobiliários)
Carlos Mendes (UNINOVA - DEE, Universidade Nova de Lisboa)
Isabel Vieira () (Universidade de Evora, Departamento de Gestão, CEFAGE-UE)

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Abstract

This paper presents three tests of contagion of the US subprime crisis to the European markets of the NYSE-Euronext group. Copula models are used to analyse dependence structures between the US's and the other markets in the sample, in the pre-crisis and in the subprime crisis periods. The first test assesses the existence of contagion on the relevant markets' indices, the second checks the homogeneity of contagion intensities, and the third compares contagion in financial and in industrial sectors' indices. Results suggest that contagion exists, and is equally felt, in most markets and that investors anticipated a spreading of the financial crisis to the real economy, long before such dissemination was observable.

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Paper provided by University of Evora, CEFAGE-UE (Portugal) in its series CEFAGE-UE Working Papers with number 2009_01.

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Length: 24 pages
Date of creation: 2009
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Handle: RePEc:cfe:wpcefa:2009_01

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Related research
Keywords: Financial contagion; subprime crisis; stock markets; copula theory.;

Find related papers by JEL classification:
F30 - International Economics - - International Finance - - - General
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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  1. Ilan Goldfajn & Taimur Baig, 1999. "Financial market contagion in the Asian crisis," Textos para discussão 400, Department of Economics PUC-Rio (Brazil). [Downloadable!]
  2. Ling Hu, 2006. "Dependence patterns across financial markets: a mixed copula approach," Applied Financial Economics, Taylor and Francis Journals, vol. 16(10), pages 717-729, June. [Downloadable!] (restricted)
  3. Lee, Lung-Fei, 1983. "Generalized Econometric Models with Selectivity," Econometrica, Econometric Society, vol. 51(2), pages 507-12, March. [Downloadable!] (restricted)
  4. Reinhart, Carmen & Calvo, Sara, 1996. "Capital Flows to Latin America: Is There Evidence of Contagion Effects?”," MPRA Paper 7124, University Library of Munich, Germany. [Downloadable!]
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  5. Rodriguez, Juan Carlos, 2007. "Measuring financial contagion: A Copula approach," Journal of Empirical Finance, Elsevier, vol. 14(3), pages 401-423, June. [Downloadable!] (restricted)
  6. Kole, Erik & Koedijk, Kees & Verbeek, Marno, 2007. "Selecting copulas for risk management," Journal of Banking & Finance, Elsevier, vol. 31(8), pages 2405-2423, August. [Downloadable!] (restricted)
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  7. Marcello Pericoli & Massimo Sbracia, 2003. "A Primer on Financial Contagion," Journal of Economic Surveys, Blackwell Publishing, vol. 17(4), pages 571-608, 09. [Downloadable!] (restricted)
    Other versions:
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This page was last updated on 2009-11-16.


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