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No contagion, only globalization and flight to quality

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  • Marie Brière
  • Ariane Chapelle
  • Ariane Szafarz

Abstract

In this article, tests for globalization and contagion are separated using an ex ante definition of crises, and contagion tests are neutralized with respect to globalization effects. A large database is constructed to study the stability of correlation matrices for four asset classes: equities, government bonds, investment-grade corporate bonds, and high-yield corporate bonds, in four geographical zones. Overall, the results confirm the instability of correlations and point to a combination of globalization and flight to quality, while emphasizing that contagion on the equity markets appears as an artifact due to globalization.

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Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series Working Papers CEB with number 12-010.

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Length: 42 p.
Date of creation: Mar 2012
Date of revision:
Publication status: Published by:
Handle: RePEc:sol:wpaper:2013/113071

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Keywords: contagion; globalization; flight to quality; crisis; diversification; correlation;

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Citations

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Cited by:
  1. Oscar Bernal Diaz & Kim Oosterlinck & Ariane Szafarz, 2009. "Observing bailout expectations during a total eclipse of the sun," DULBEA Working Papers 09-01.RS, ULB -- Universite Libre de Bruxelles.
  2. Charles Plaigin, 2009. "Exploratory study on the presence of cultural and institutional growth spillovers," DULBEA Working Papers 09-03.RS, ULB -- Universite Libre de Bruxelles.
  3. A. Can Inci & H.C. Li & Joseph McCarthy, 2011. "Measuring flight to quality: a local correlation analysis," Review of Accounting and Finance, Emerald Group Publishing, vol. 10(1), pages 69 - 87, February.
  4. Le Pen, Yannick & Sévi, Benoît, . "News and correlations: an impulse response analysis," Open Access publications from Université Paris-Dauphine urn:hdl:123456789/6804, Université Paris-Dauphine.

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