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No contagion, only globalization and flight to quality

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Author Info
Marie Brière () (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles,Crédit Agricole Asset Management,Paris.)
Ariane Chapelle () (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles)
Ariane Szafarz () (Centre Emile Bernheim, Solvay Business School, Université Libre de Bruxelles.)

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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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Publisher Info
Paper provided by Université libre de Bruxelles, Department of Applied Economics (DULBEA) in its series Working Papers DULBEA with number 08-22.RS.

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Length: 50 pages
Date of creation: Nov 2008
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Handle: RePEc:dul:wpaper:08-22rs

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Related research
Keywords: contagion; globalization; flight to quality; international financial markets.;

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Find related papers by JEL classification:
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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