The Contagion Effect of the Terrorist Attacks of the 11th of September
AbstractIn the context of interdependence of the financial markets, it becomes interesting to analyze the implications associated with the Terrorist Attacks of the 11th of September of 2001, in the USA, in terms of the development of contagion mechanisms between the main international stock exchanges. The sample is subdivided in two periods, in order to capture two different conjectures, that is, the pre-attack period, and the one that is concerned with the post-attack period. The results obtained through the estimation of a vector autoregressive model, incorporating an error correction mechanism, are presented. These results provide the detection of cointegrating relations among the economic variables, in study. A dynamic analysis is done, using exogeneity block tests, in order to check the existence of causality relations, which are defined in a Grangerian sense. For a forecasting purpose, the techniques of the variance decomposition of Cholesky, and of the impulse response functions are used. The occurrence of contagion is ratified by the results, starting from the terrorist attacks in the USA, which yielded a bigger volatility, with positive sign, in the Portuguese, and in the English Stock Exchanges.
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Length: 27 pages
Date of creation: 14 Oct 2005
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Contagion; Stock Exchange; Vector Autoregressive Model.;
Find related papers by JEL classification:
- C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-10-22 (All new papers)
- NEP-FIN-2005-10-22 (Finance)
- NEP-FMK-2005-10-22 (Financial Markets)
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