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Asset market linkages in crisis periods

Author

Listed:
  • Hartmann, Philipp
  • Straetmans, Stefan
  • de Vries, Casper

Abstract

We characterize asset return linkages during periods of stress by an extremal dependence measure. Contrary to correlation analysis, this non-parametric measure is not predisposed towards the normal distribution and can account for non-linear relationships. Our estimates for the G-5 countries suggest that simultaneous crashes in stock markets are about two times more likely than in bond markets. Moreover, stock-bond contagion is about 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 JEL Classification: G1, F3, C49

Suggested Citation

  • Hartmann, Philipp & Straetmans, Stefan & de Vries, Casper, 2001. "Asset market linkages in crisis periods," Working Paper Series 71, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:200171
    Note: 229414
    as

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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp071.pdf
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    Keywords

    Bivariate Extreme Value Analysis; Extreme Co-movements; Flight to Quality;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • F3 - International Economics - - International Finance
    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other

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