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Financial Autarchy as Contagion Prevention: The Case of Colombian Pension Funds

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Abstract

Regulations restricting investment by pension funds in high risk and foreign assets may quarantine member accounts from contagious transmissions during financial crises. This paper analyses contagion from US equity markets to emerging market autarchic assets (Colombian private pension funds) during the recent financial crises. We test for contagion as changes in systematic risk between financial asset returns using an M-GARCH framework, where the S&P500 is the source of contagion to the autarchic asset. We find no evidence of contagion during the 2007-2009 crises, indicating protection to plan members from regulated portfolio restrictions during this period, but contagion from US stocks and fixed interest factors is significant during the recent sovereign debt crisis.

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Bibliographic Info

Paper provided by Quantitative Finance Research Centre, University of Technology, Sydney in its series Research Paper Series with number 323.

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Length: 28
Date of creation: 01 Jan 2013
Date of revision:
Handle: RePEc:uts:rpaper:323

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Keywords: emerging markets; global financial crisis; sovereign debt crisis; regulation; systematic risk;

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  1. José Antonio Ocampo, 2009. "Latin America and the global financial crisis," Cambridge Journal of Economics, Oxford University Press, vol. 33(4), pages 703-724, July.
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  11. Reinhart, Carmen & Kaminsky, Graciela, 1999. "The twin crises: The causes of banking and balance of payments problems," MPRA Paper 14081, University Library of Munich, Germany.
  12. Fujii, Eiji, 2005. "Intra and inter-regional causal linkages of emerging stock markets: evidence from Asia and Latin America in and out of crises," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 15(4), pages 315-342, October.
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