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No contagion, only globalization and flight to quality

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  • Szafarz, Ariane
  • Chapelle, Ariane
  • Brière, Marie

Abstract

In this article, tests for globalization and contagion are separated using an ex ante definition of crises, and contagion tests are neutralized with respect to globalization effects. A large database is constructed to study the stability of correlation matrices for four asset classes : equities, government bonds, and corporate bonds – investment grade and high yield – in four geographical zones. Overall, the results confirm the instability of correlations and point to a combination of globalization and flight to quality, while emphasizing that contagion on the equity markets appears as an artifact due to globalization.

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Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/7746.

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Date of creation: 2012
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Publication status: Published in Journal of International Money and Finance, 2012, Vol. 31, no. 6. pp. 1729-1744.Length: 15 pages
Handle: RePEc:dau:papers:123456789/7746

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Keywords: flight to quality; globalization; Contagion; international financial markets;

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Cited by:
  1. Bernal, Oscar & Oosterlinck, Kim & Szafarz, Ariane, 2010. "Observing bailout expectations during a total eclipse of the sun," Journal of International Money and Finance, Elsevier, vol. 29(7), pages 1193-1205, November.
  2. Zheng, Tingguo & Zuo, Haomiao, 2013. "Reexamining the time-varying volatility spillover effects: A Markov switching causality approach," The North American Journal of Economics and Finance, Elsevier, vol. 26(C), pages 643-662.
  3. Geert Bekaert & Michael Ehrmann & Marcel Fratzscher & Arnaud Mehl, 2014. "The Global Crisis and Equity Market Contagion," Discussion Papers of DIW Berlin 1352, DIW Berlin, German Institute for Economic Research.
  4. Le Pen, Yannick & Sévi, Benoît, 2009. "News and correlations: an impulse response analysis," Economics Papers from University Paris Dauphine 123456789/6804, Paris Dauphine University.
  5. A. Can Inci & H.C. Li & Joseph McCarthy, 2011. "Measuring flight to quality: a local correlation analysis," Review of Accounting and Finance, Emerald Group Publishing, vol. 10(1), pages 69 - 87, February.
  6. Xavier De Scheemaekere & Kim Oosterlinck & Ariane Szafarz, 2012. "Addressing Economic Crises: The Reference-Class Problem," Working Papers CEB 12-024, ULB -- Universite Libre de Bruxelles.
  7. Charles Plaigin, 2009. "Exploratory study on the presence of cultural and institutional growth spillovers," DULBEA Working Papers 09-03.RS, ULB -- Universite Libre de Bruxelles.
  8. Mariya Gubareva & Maria Rosa Borges, 2013. "Typological Classification, Diagnostics, and Measurement of Flights-to-Quality," Working Papers Department of Economics 2013/15, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.

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