Are emerging markets exposed to contagion from U.S.: Evidence from stock and sovereign bond markets
AbstractThe aim of this article is to examine: how the dynamics of correlations between five emerging countries (Argentina, Chili, Hungary, Russia and Poland), two emerging regions (Latin America (LAC) and Europe (EU)) and U.S. evolved from January 2004 to September 2011. The main contribution of this study is to explore whether the plunging stock market in U.S., in the aftermath of global financial crisis (2008-2009), exert contagion effects on emerging equity and sovereign bond markets. To this end we rely on Asymmetric Dynamic Conditional Correlation (ADCC) model developed by Cappiello et al. (2006), which accounts for asymmetries in conditional variances and correlations to negative returns. We show that there is mean shift in the estimated DCC immediately after the Lehman Brothers failure in September 2008. We refer this finding as contagion from U.S. stock market to emerging equity and sovereign bond markets especially in emerging LAC region.
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Bibliographic InfoPaper provided by Department of Research, Ipag Business School in its series Working Papers with number 2014-058.
Length: 24 pages
Date of creation: 06 Jan 2014
Date of revision:
Global financial crisis; contagion; emerging equity markets; sovereign risk.;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- F30 - International Economics - - International Finance - - - General
- G01 - Financial Economics - - General - - - Financial Crises
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2014-02-21 (All new papers)
- NEP-FMK-2014-02-21 (Financial Markets)
- NEP-MAC-2014-02-21 (Macroeconomics)
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