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Cobreaking of Stock Prices and Contagion

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Author Info

  • Ahlgren, Niklas

    ()
    (Swedish School of Economics and Business Administration)

  • Antell, Jan

    ()
    (Swedish School of Economics and Business Administration)

Abstract

Financial crises have shown that dramatic movements in one financial market can have a powerful impact on other markets. The paper proposes to use cobreaking to model comovements between financial markets during crises and to test for conta-gion. It finds evidence of cobreaking between stock returns in developed markets. Finding cobreaking has implications for the diversification of international investments. For emerging mar-ket stock returns the evidence of cobreaking is mainly due to the non-financial event of the 9/11 terrorist attacks in 2001. Fi-nancial crises originating in one emerging market do not spread to other markets, i.e., no contagion.

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Bibliographic Info

Paper provided by Hanken School of Economics in its series Working Papers with number 537.

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Length: 20 pages
Date of creation: 04 Jul 2008
Date of revision:
Handle: RePEc:hhb:hanken:0537

Note: This paper is published as: Ahlgren, Niklas and Antell, Jan (2010): 'Stock Market Linkages and Financial Contagion', Quarterly Review of Economics and Finance, 50, 157-166.
Contact details of provider:
Postal: Hanken School of Economics, Arkadiankatu 22, P.O.B. 479; FIN 00101 Helsinki, Finland
Phone: +358-9-431 331
Fax: +358-9-431 33 333
Web page: http://www.hanken.fi
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Related research

Keywords: cobreaking; contagion; international financial markets;

This paper has been announced in the following NEP Reports:

References

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  1. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October.
  2. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(4), pages 393-95, October.
  3. Geert Bekaert & Campbell R. Harvey & Angela Ng, 2005. "Market Integration and Contagion," The Journal of Business, University of Chicago Press, vol. 78(1), pages 39-70, January.
  4. Niklas Ahlgren & Jan Antell, 2002. "Testing for cointegration between international stock prices," Applied Financial Economics, Taylor & Francis Journals, vol. 12(12), pages 851-861.
  5. Perron, P, 1988. "The Great Crash, The Oil Price Shock And The Unit Root Hypothesis," Papers 338, Princeton, Department of Economics - Econometric Research Program.
  6. Graciela L. Kaminsky & Carmen M. Reinhart & Carlos A. V�gh, 2003. "The Unholy Trinity of Financial Contagion," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 51-74, Fall.
  7. Hendry, David F. & Massmann, Michael, 2007. "Co-Breaking: Recent Advances and a Synopsis of the Literature," Journal of Business & Economic Statistics, American Statistical Association, vol. 25, pages 33-51, January.
  8. Robert F. Engle & Sharon Kozicki, 1990. "Testing For Common Features," NBER Technical Working Papers 0091, National Bureau of Economic Research, Inc.
  9. Corsetti, Giancarlo & Pericoli, Marcello & Sbracia, Massimo, 2002. "Some Contagion, Some Interdependence: More Pitfalls in Tests of Financial Contagion," CEPR Discussion Papers 3310, C.E.P.R. Discussion Papers.
  10. Marcello Pericoli & Massimo Sbracia, 2003. "A Primer on Financial Contagion," Journal of Economic Surveys, Wiley Blackwell, vol. 17(4), pages 571-608, 09.
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