Asset Market Linkages in Crisis Periods
AbstractWe characterize asset return linkages during periods of stress by an extremal dependence measure. Contrary to correlation analysis, this nonparametric measure is not predisposed toward the normal distribution and can allow for nonlinear relationships. Our estimates for the G-5 countries suggest that simultaneous crashes between stock markets are much more likely than between bond markets. However, for the assessment of financial system stability the widely disregarded cross-asset perspective is particularly important. For example, our data show that stock-bond contagion is approximately as frequent as flight to quality from stocks into bonds. Extreme cross-border linkages are surprisingly similar to national linkages, illustrating a potential downside to international financial integration. Published in Review of Economics and Statistics (2004), 86, 313-326.
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Bibliographic InfoPaper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 01-071/2.
Date of creation: 19 Jul 2001
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Web page: http://www.tinbergen.nl
Financial Crises; Systemic Risk; Contagion; Market Crashes; Flight to Quality; Bivariate Extreme Value Analysis; Extreme Co-movements;
Other versions of this item:
- Hartmann, P. & Straetmans, S. & De Vries, C.G., 2001. "Asset Market Linkages in Crisis Periods," Papers 71, Quebec a Montreal - Recherche en gestion.
- Hartmann, Philipp & Straetmans, Stefan & de Vries, Casper, 2001. "Asset market linkages in crisis periods," Working Paper Series 0071, European Central Bank.
- de Vries, Casper G & Hartmann, Philipp & Straetmans, Stefan, 2001. "Asset Market Linkages in Crisis Periods," CEPR Discussion Papers 2916, C.E.P.R. Discussion Papers.
- G1 - Financial Economics - - General Financial Markets
- F3 - International Economics - - International Finance
- C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other
This paper has been announced in the following NEP Reports:
- NEP-ALL-2001-09-10 (All new papers)
- NEP-FMK-2001-09-10 (Financial Markets)
- NEP-IFN-2001-09-10 (International Finance)
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