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Detecting Shift and Pure Contagion in East Asian Equity Markets: A Unified Approach

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  • Thomas J. Flavin and Ekaterini Panopoulou

Abstract

We test for contagion between pairs of East Asian equity markets over the period 1990-2007. We develop an econometric methodology that allows us to test for both ‘shift’ and ‘pure’ contagion within a unified framework. Using both Hong Kong and Thailand as potential shock sources, we find strong evidence of both types of contagion. Therefore during episodes of high-volatility, equity returns are influenced by changes in the transmission of common shocks and additionally by the diffusion of idiosyncratic shocks through linkages which do not exist during normal times.

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Paper provided by IIIS in its series The Institute for International Integration Studies Discussion Paper Series with number iiisdp236.

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Date of creation: 10 Dec 2007
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Handle: RePEc:iis:dispap:iiisdp236

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Cited by:
  1. Thomas J. Flavin & Ekaterini Panopoulou & Deren Unalmis, 2008. "On the Stability of Domestic Financial Market Linkages in the Presence of time-varying Volatility," Working Papers 0810, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.

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