Advanced Search
MyIDEAS: Login to save this paper or follow this series

No Contagion, only Globalization and Flight to Quality

Contents:

Author Info

  • Marie Briere
  • 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.

Download Info

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

Bibliographic Info

Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/149092.

as in new window
Length:
Date of creation: 2012
Date of revision:
Publication status: Published in: Journal of international money and finance (2012) v.31 n° 6,p.17291744
Handle: RePEc:ulb:ulbeco:2013/149092

Contact details of provider:
Postal: CP135, 50, avenue F.D. Roosevelt, 1050 Bruxelles
Web page: http://difusion.ulb.ac.be
More information through EDIRC

Related research

Keywords: Contagion; Globalization; Flight to quality; Crisis; Diversification; Correlation;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Geert Bekaert & Robert J. Hodrick & Xiaoyan Zhang, 2005. "International Stock Return Comovements," NBER Working Papers 11906, National Bureau of Economic Research, Inc.
  2. Robert-Paul Berben & W. Jos Jansen, 2003. "Comovement in international equity markets: A sectoral view," Finance, EconWPA 0310001, EconWPA.
  3. William N. Goetzmann & Lingfeng Li & K. Geert Rouwenhorst, 2001. "Long-Term Global Market Correlations," NBER Working Papers 8612, National Bureau of Economic Research, Inc.
  4. Chakrabarti, Rajesh & Roll, Richard, 2002. "East Asia and Europe During the 1997 Asian Collapse: A Clinical Study of a Financial Crisis," University of California at Los Angeles, Anderson Graduate School of Management, Anderson Graduate School of Management, UCLA qt09f9j331, Anderson Graduate School of Management, UCLA.
  5. De Santis, Giorgio & Gerard, Bruno, 1997. " International Asset Pricing and Portfolio Diversification with Time-Varying Risk," Journal of Finance, American Finance Association, American Finance Association, vol. 52(5), pages 1881-1912, December.
  6. Michael D. Bordo & Anna J. Schwartz, 1996. "Why Clashes Between Internal and External Stability Goals End in Currency Crises, 1797-1994," NBER Working Papers 5710, National Bureau of Economic Research, Inc.
  7. François Longin, 2001. "Extreme Correlation of International Equity Markets," Journal of Finance, American Finance Association, American Finance Association, vol. 56(2), pages 649-676, 04.
  8. Fernando A. Broner & R. Gaston Gelos & Carmen Reinhart, 2004. "When in Peril, Retrench: Testing the Portfolio Channel of Contagion," NBER Working Papers 10941, National Bureau of Economic Research, Inc.
  9. Ariane Szafarz, 2012. "Financial crises in efficient markets: How fundamentalists fuel volatility," ULB Institutional Repository 2013/149191, ULB -- Universite Libre de Bruxelles.
  10. Morana, Claudio & Beltratti, Andrea, 2008. "Comovements in international stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 18(1), pages 31-45, February.
  11. P. Hartmann & S. Straetmans & C. G. de Vries, 2004. "Asset Market Linkages in Crisis Periods," The Review of Economics and Statistics, MIT Press, vol. 86(1), pages 313-326, February.
  12. Marie Christine Adam & Ariane Szafarz, 1993. "Speculative Bubbles and Financial Markets," ULB Institutional Repository 2013/665, ULB -- Universite Libre de Bruxelles.
  13. Geert Bekaert & Campbell R. Harvey, 2003. "Market Integration and Contagion," NBER Working Papers 9510, National Bureau of Economic Research, Inc.
  14. Stefan Erdorf & Nicolas Heinrichs, 2011. "Co-movement of revenue: structural changes in the business cycle," Financial Markets and Portfolio Management, Springer, Springer, vol. 25(4), pages 411-433, December.
  15. Monica Billio & Massimiliano Caporin, 2007. "Market linkages, variance spillovers and correlation stability: empirical evidences of financial contagion," Working Papers 2007_18, Department of Economics, University of Venice "Ca' Foscari".
  16. Jan Annaert & Anouk Claes & Marc De Ceuster, 2006. "Intertemporal stability of the European credit spread co-movement structure1," The European Journal of Finance, Taylor & Francis Journals, Taylor & Francis Journals, vol. 12(1), pages 23-32.
  17. Markus K. Brunnermeier, 2008. "Deciphering the Liquidity and Credit Crunch 2007-08," NBER Working Papers 14612, National Bureau of Economic Research, Inc.
  18. José De Gregorio, 1999. "Exchange Rate Policy in Chile since 1960: Political Economy and The Choice of Regime," Documentos de Trabajo, Centro de Economía Aplicada, Universidad de Chile 68, Centro de Economía Aplicada, Universidad de Chile.
  19. Thomas J.Flavin & Ekaterini Panopoulou, 2007. "On the robustness of international portfolio diversification benefits to regime-switching volatility," Economics, Finance and Accounting Department Working Paper Series, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth n1801007.pdf, Department of Economics, Finance and Accounting, National University of Ireland - Maynooth.
  20. Connolly, Robert & Stivers, Chris & Sun, Licheng, 2005. "Stock Market Uncertainty and the Stock-Bond Return Relation," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 40(01), pages 161-194, March.
  21. Gordon J. Alexander & Amy K. Edwards & Michael G. Ferri, 2000. "What Does Nasdaq's High Yield Bond Market Reveal about Bondholder-Shareholder Conflict?," Financial Management, Financial Management Association, Financial Management Association, vol. 29(1), Spring.
  22. Marcello Pericoli & Massimo Sbracia, 2003. "A Primer on Financial Contagion," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 17(4), pages 571-608, 09.
  23. Dooley, Michael & Hutchison, Michael, 2009. "Transmission of the U.S. subprime crisis to emerging markets: Evidence on the decoupling-recoupling hypothesis," Journal of International Money and Finance, Elsevier, Elsevier, vol. 28(8), pages 1331-1349, December.
  24. Michael Bordo & Anna Schwartz, 1996. "Why clashes between internal and external stability goals end in currency crises, 1797–1994," Open Economies Review, Springer, Springer, vol. 7(1), pages 437-468, March.
  25. Graciela L. Kaminsky & Sergio L. Schmukler, 1999. "What triggers market jitters: a chronicle of the Asian crisis," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 634, Board of Governors of the Federal Reserve System (U.S.).
  26. D. Sornette & Y. Malevergne, 2001. "From Rational Bubbles to Crashes," Papers cond-mat/0102305, arXiv.org.
  27. Mardi Dungey & Renee Fry & Vance L. Martin, 2004. "Currency Market Contagion In The Asia-Pacific Region," Australian Economic Papers, Wiley Blackwell, Wiley Blackwell, vol. 43(4), pages 379-395, December.
  28. Bartram, Söhnke M. & Bodnar, Gordon M., 2009. "No place to hide: The global crisis in equity markets in 2008/2009," Journal of International Money and Finance, Elsevier, Elsevier, vol. 28(8), pages 1246-1292, December.
  29. Christos S. Savva & Denise R. Osborn & Len Gill, 2006. "Periodic Dynamic Conditional Correlations between Stock Markets in Europe and the US," The School of Economics Discussion Paper Series, Economics, The University of Manchester 0629, Economics, The University of Manchester.
  30. Kenneth L. Smith, 2002. "Government Bond Market Seasonality, Diversification, and Cointegration: International Evidence," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, Southern Finance Association;Southwestern Finance Association, vol. 25(2), pages 203-221.
  31. Dungey, Mardi & Fry, Renee & Gonzalez-Hermosillo, Brenda & Martin, Vance, 2006. "Contagion in international bond markets during the Russian and the LTCM crises," Journal of Financial Stability, Elsevier, Elsevier, vol. 2(1), pages 1-27, April.
  32. Okimoto, Tatsuyoshi, 2008. "New Evidence of Asymmetric Dependence Structures in International Equity Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 43(03), pages 787-815, September.
  33. 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, Emerald Group Publishing, vol. 10(1), pages 69 - 87, February.
  34. Corsetti, Giancarlo & Pericoli, Marcello & Sbracia, Massimo, 2005. "'Some contagion, some interdependence': More pitfalls in tests of financial contagion," Journal of International Money and Finance, Elsevier, Elsevier, vol. 24(8), pages 1177-1199, December.
  35. Guillermo A. Calvo & Enrique G. Mendoza, 1999. "Regional Contagion and the Globalization of Securities Markets," NBER Working Papers 7153, National Bureau of Economic Research, Inc.
  36. Kristin Forbes & Roberto Rigobon, 1999. "No Contagion, Only Interdependence: Measuring Stock Market Co-movements," NBER Working Papers 7267, National Bureau of Economic Research, Inc.
  37. Longin, Francois & Solnik, Bruno, 1995. "Is the correlation in international equity returns constant: 1960-1990?," Journal of International Money and Finance, Elsevier, Elsevier, vol. 14(1), pages 3-26, February.
  38. P. Silvapulle & C. W. J. Granger, 2001. "Large returns, conditional correlation and portfolio diversification: a value-at-risk approach," Quantitative Finance, Taylor & Francis Journals, Taylor & Francis Journals, vol. 1(5), pages 542-551.
  39. Goldstein, Itay & Pauzner, Ady, 2004. "Contagion of self-fulfilling financial crises due to diversification of investment portfolios," Journal of Economic Theory, Elsevier, Elsevier, vol. 119(1), pages 151-183, November.
  40. Shackman, Joshua D., 2006. "The equity premium and market integration: Evidence from international data," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 16(2), pages 155-179, April.
  41. Baur, Dirk G. & Lucey, Brian M., 2009. "Flights and contagion--An empirical analysis of stock-bond correlations," Journal of Financial Stability, Elsevier, Elsevier, vol. 5(4), pages 339-352, December.
  42. Candelon, Bertrand & Hecq, Alain & Verschoor, Willem F.C., 2005. "Measuring common cyclical features during financial turmoil: Evidence of interdependence not contagion," Journal of International Money and Finance, Elsevier, Elsevier, vol. 24(8), pages 1317-1334, December.
  43. Dirk Baur & Brian M. Lucey, 2006. "Flight-to-quality or Contagion? An EmpiricalAnalysis of Stock-bond correlations," The Institute for International Integration Studies Discussion Paper Series, IIIS iiisdp122, IIIS.
  44. Marie Briere & Ariane Szafarz, 2008. "Crisis-Robust Bond Portfolios," ULB Institutional Repository 2013/14150, ULB -- Universite Libre de Bruxelles.
  45. d'Addona, Stefano & Kind, Axel H., 2006. "International stock-bond correlations in a simple affine asset pricing model," Journal of Banking & Finance, Elsevier, Elsevier, vol. 30(10), pages 2747-2765, October.
  46. Laura E. Kodres & Matthew Pritsker, 2002. "A Rational Expectations Model of Financial Contagion," Journal of Finance, American Finance Association, American Finance Association, vol. 57(2), pages 769-799, 04.
  47. Asgharian, Hossein & Nossman, Marcus, 2011. "Risk contagion among international stock markets," Journal of International Money and Finance, Elsevier, Elsevier, vol. 30(1), pages 22-38, February.
  48. Caporale, Guglielmo Maria & Cipollini, Andrea & Spagnolo, Nicola, 2005. "Testing for contagion: a conditional correlation analysis," Journal of Empirical Finance, Elsevier, Elsevier, vol. 12(3), pages 476-489, June.
  49. Oecd, 2007. "Financial Markets Highlights - May 2007," Financial Market Trends, OECD Publishing, OECD Publishing, vol. 2007(1), pages 11-22.
  50. Sébastien WÄLTI, 2003. "Testing for Contagion in International Financial Markets: Which Way to Go?," FAME Research Paper Series, International Center for Financial Asset Management and Engineering rp92, International Center for Financial Asset Management and Engineering.
  51. Campbell, Rachel A.J. & Forbes, Catherine S. & Koedijk, Kees G. & Kofman, Paul, 2008. "Increasing correlations or just fat tails?," Journal of Empirical Finance, Elsevier, Elsevier, vol. 15(2), pages 287-309, March.
  52. Chesnay, F. & Jondeau, E., 2000. "Does Correlation between Stock Returns Really Increase during Turbulent Period?," Working papers, Banque de France 73, Banque de France.
  53. Chakrabarti, Rajesh & Roll, Richard, 2002. "East Asia and Europe during the 1997 Asian collapse: a clinical study of a financial crisis," Journal of Financial Markets, Elsevier, Elsevier, vol. 5(1), pages 1-30, January.
  54. Oecd, 2007. "Financial Markets Highlights November 2007," Financial Market Trends, OECD Publishing, OECD Publishing, vol. 2007(2), pages 11-25.
  55. Kaplanis, Evi C., 1988. "Stability and forecasting of the comovement measures of international stock market returns," Journal of International Money and Finance, Elsevier, Elsevier, vol. 7(1), pages 63-75, March.
  56. Lin, Wen-Ling & Engle, Robert F & Ito, Takatoshi, 1994. "Do Bulls and Bears Move across Borders? International Transmission of Stock Returns and Volatility," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 7(3), pages 507-38.
  57. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, Elsevier, vol. 33(1), pages 3-56, February.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Ielpo, Florian & Chevallier, Julien, 2013. "Volatility spillovers in commodity markets," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/11708, Paris Dauphine University.
  2. Charles Plaigin, 2009. "Exploratory study on the presence of cultural and institutional growth spillovers," DULBEA Working Papers, ULB -- Universite Libre de Bruxelles 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, Emerald Group Publishing, vol. 10(1), pages 69 - 87, February.
  4. Zheng, Tingguo & Zuo, Haomiao, 2013. "Reexamining the time-varying volatility spillover effects: A Markov switching causality approach," The North American Journal of Economics and Finance, Elsevier, Elsevier, vol. 26(C), pages 643-662.
  5. Bernal, Oscar & Oosterlinck, Kim & Szafarz, Ariane, 2010. "Observing bailout expectations during a total eclipse of the sun," Journal of International Money and Finance, Elsevier, Elsevier, vol. 29(7), pages 1193-1205, November.
  6. Xavier De Scheemaekere & Kim Oosterlinck & Ariane Szafarz, 2012. "Addressing Economic Crises: The Reference-Class Problem," Working Papers CEB, ULB -- Universite Libre de Bruxelles 12-024, ULB -- Universite Libre de Bruxelles.
  7. Geert Bekaert & Michael Ehrmann & Marcel Fratzscher & Arnaud Mehl, 2014. "The Global Crisis and Equity Market Contagion," Discussion Papers of DIW Berlin 1352, DIW Berlin, German Institute for Economic Research.
  8. Mariya Gubareva & Maria Rosa Borges, 2013. "Typological Classification, Diagnostics, and Measurement of Flights-to-Quality," Working Papers Department of Economics, ISEG - School of Economics and Management, Department of Economics, University of Lisbon 2013/15, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  9. Le Pen, Yannick & Sévi, Benoît, 2009. "News and correlations: an impulse response analysis," Economics Papers from University Paris Dauphine, Paris Dauphine University 123456789/6804, Paris Dauphine University.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ulb:ulbeco:2013/149092. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benoit Pauwels).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.