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Contagion And Portfolio Shift In Emerging Countries´ Sovereign Bonds

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Author Info
Alicia Garcia Herrero (Banco de España)
Antonio Diez de los Rios (CEMFI)

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Abstract

The paper tests whether there were events of contagion, and portfolio shift, in the sovereign bond markets of eleven emerging countries' between January 1995 and November 2001. From existing definitions, we narrow down the concept of contagion by focusing on pricing errors, after general market movements have been taken into account with a three-factor asset pricing model. We measure contagion (and portfolio shift) in terms of a causal positive (negative) dynamic co-movement between sovereign bond pricing errors. Downgrades of sovereign ratings are used as proxies for a shock. We find empirical support for contagion and portfolio shift for a number of countries on the basis of our definition.

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Paper provided by EconWPA in its series International Finance with number 0403002.

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Date of creation: 02 Mar 2004
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Handle: RePEc:wpa:wuwpif:0403002

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Related research
Keywords: Financial linkages; financial crisis; Granger causality; international;

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Find related papers by JEL classification:
F30 - International Economics - - International Finance - - - General
F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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  1. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  2. Richard Cantor & Frank Packer, 1996. "Determinants and impact of sovereign credit ratings," Economic Policy Review, Federal Reserve Bank of New York, issue Oct, pages 37-53. [Downloadable!]
    Other versions:
  3. Kristin J. Forbes & Roberto Rigobon, 2002. "No Contagion, Only Interdependence: Measuring Stock Market Comovements," Journal of Finance, American Finance Association, vol. 57(5), pages 2223-2261, October. [Downloadable!] (restricted)
    Other versions:
  4. Roberto Rigobon, 2001. "Contagion: How to Measure It?," NBER Working Papers 8118, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Barry Eichengreen & Ashoka Mody, 1998. "What Explains Changing Spreads on Emerging-Market Debt: Fundamentals or Market Sentiment?," NBER Working Papers 6408, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Adler, Michael & Dumas, Bernard, 1983. " International Portfolio Choice and Corporation Finance: A Synthesis," Journal of Finance, American Finance Association, vol. 38(3), pages 925-84, June. [Downloadable!] (restricted)
  7. Taimur Baig & Ilan Goldfajn, 2000. "The Russian default and the contagion to Brazil," Textos para discussão 420, Department of Economics PUC-Rio (Brazil). [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Angelo Marsiglia Fasolo, 2006. "Interdependence and Contagion: an Analysis of Information Transmission in Latin America's Stock Markets," Working Papers Series 112, Central Bank of Brazil, Research Department. [Downloadable!]
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