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International Integration of Equity Markets and Contagion Effects

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  • Paul Cashin
  • Manmohan S. Kumar
  • C. John McDermott

Abstract

This paper investigates empirically the degree of international integration of industrial and emerging country equity markets. It analyzes two issues: first, the extent to which equity prices have tended to move similarly across countries and regions in the long run; and second, the strength of cross-country “contagion” effects. The paper’s findings suggest that both intra-regional and inter-regional linkages across national equity markets have strengthened in recent years. In addition, using impulse response functions, the paper shows that cross-country contagion effects of country-specific shocks dissipate in a matter of weeks while contagion effects of global shocks take several months to unwind themselves.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 95/110.

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Length: 58
Date of creation: 01 Nov 1995
Date of revision:
Handle: RePEc:imf:imfwpa:95/110

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Cited by:
  1. Francisco J. Climent & Vicente Meneu, . "Has 1997 Asian Crisis Increased Information Flows Between International Markets?," Working Papers on International Economics and Finance 01-01, FEDEA.
  2. Jose Antonio R. Tan, III, 1998. "Contagion effects during the Asian financial crisis: stock price data," Pacific Basin Working Paper Series, Federal Reserve Bank of San Francisco 98-06, Federal Reserve Bank of San Francisco.
  3. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, American Finance Association, vol. 57(5), pages 2223-2261, October.
  4. Eduardo Levy Yeyati & Sergio Luis Schmukler & Neeltje Van Horen, 2006. "International Financial Integration through the Law of One Price," Business School Working Papers, Universidad Torcuato Di Tella 2006-01, Universidad Torcuato Di Tella.
  5. Imbs, Jean, 2003. "Trade, Finance, Specialization and Synchronization," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3779, C.E.P.R. Discussion Papers.
  6. el Alaoui, AbdelKader & Masih, Mansur & Bacha, Obiyathulla & Asutay, Mehmet, 2014. "Leverage versus volatility: Evidence from the Capital Structure of European Firms," MPRA Paper 57682, University Library of Munich, Germany.
  7. Roberto Rigobon, 1999. "On the Measurement of the International Propagation of Shocks," NBER Working Papers 7354, National Bureau of Economic Research, Inc.
  8. Roberto Rigobon, 2002. "Contagion: How to Measure It?," NBER Chapters, National Bureau of Economic Research, Inc, in: Preventing Currency Crises in Emerging Markets, pages 269-334 National Bureau of Economic Research, Inc.
  9. Levy Yeyati, Eduardo & Schmukler, Sergio L. & Van Horen, Neeltje, 2009. "International financial integration through the law of one price: The role of liquidity and capital controls," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 18(3), pages 432-463, July.
  10. Gallegati, Marco, 2012. "A wavelet-based approach to test for financial market contagion," Computational Statistics & Data Analysis, Elsevier, Elsevier, vol. 56(11), pages 3491-3497.
  11. Baur, Dirk & Schulze, Niels, 2005. "Coexceedances in financial markets--a quantile regression analysis of contagion," Emerging Markets Review, Elsevier, Elsevier, vol. 6(1), pages 21-43, April.
  12. Ranil Salgado & Luca Antonio Ricci & Francesco Caramazza, 2000. "Trade and Financial Contagion in Currency Crises," IMF Working Papers, International Monetary Fund 00/55, International Monetary Fund.
  13. Simone Manganelli & Lorenzo Cappiello & Bruno Gerard, 2004. "The Contagion Box: Measuring Co-Movements in Financial Markets by Regression Quantiles," Econometric Society 2004 Latin American Meetings, Econometric Society 77, Econometric Society.
  14. Kwanho Shin, 2008. "Global and Regional Shocks: Challenges to Asian," Working Papers id:1788, eSocialSciences.
  15. Goohoon Kwon & Raphael A. Espinoza, 2009. "Regional Financial Integration in the Caribbean," IMF Working Papers, International Monetary Fund 09/139, International Monetary Fund.
  16. Gammadigbé, Vigninou, 2012. "Les cycles économiques des pays de l'UEMOA: synchrones ou déconnectés?
    [Business cycles in the WAEMU countries: synchronous or disconnected?]
    ," MPRA Paper 39400, University Library of Munich, Germany, revised Jun 2012.
  17. el Alaoui, AbdelKader & Masih, Mansur & Bacha, Obiyathulla & Asutay, Mehmet, 2014. "Leverage, Sensitivity to Market Risk and Contagion: A Multi-Country Analysis for Shari’ah(Islamic) Stock Screening," MPRA Paper 57685, University Library of Munich, Germany.

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