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Equity Market Comovement and Contagion: A Sectoral Perspective

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  • Kate Phylaktis
  • Lichuan Xia

Abstract

"This paper takes an asset pricing perspective to investigate the equity market comovement and contagion at the sector level during the period 1990-2004 across the regions of Europe, Asia, and Latin America. It examines whether unexpected shocks from a particular market, or group of markets, are propagated to the sectors in other countries. The results confirm the sector heterogeneity of contagion. This implies that there are sectors that can still provide a channel for achieving the benefits of international diversification during crises despite the prevailing contagion at the market level. In addition, the results lend support to the importance of financial links in the propagation of contagion." Copyright (c) 2009 Financial Management Association International.

Suggested Citation

  • Kate Phylaktis & Lichuan Xia, 2009. "Equity Market Comovement and Contagion: A Sectoral Perspective," Financial Management, Financial Management Association International, vol. 38(2), pages 381-409, June.
    • Handle: RePEc:bla:finmgt:v:38:y:2009:i:2:p:381-409
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    2. Kohn, Maximilian-Benedikt Herwarth Detlef & Pereira, Pedro L. Valls, 2016. "Speculative bubbles and contagion: analysis of volatility's clusters during the DotCom bubble based on the dynamic conditional correlation model," Textos para discussão 418, FGV EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
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    6. Fedorova, Elena, 2011. "Transfer of financial risk in emerging eastern European stock markets : A sectoral perspective," BOFIT Discussion Papers 24/2011, Bank of Finland, Institute for Economies in Transition.
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    13. Jessica James & Kristjan Kasikov & Kerry-Ann Edwards, 2012. "The end of diversification," Quantitative Finance, Taylor & Francis Journals, vol. 12(11), pages 1629-1636, November.
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    15. Hakim, Idwan & Masih, Mansur, 2014. "Portfolio diversification strategy for Malaysia: International and sectoral perspectives," MPRA Paper 58909, University Library of Munich, Germany.
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    17. Alexander Eptas & Lawrence A. Leger, 2010. "A Mean-Variance Diagnosis of the Financial Crisis: International Diversification and Safe Havens," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 3(1), pages 1-21, December.
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    20. Nico Katzke, 2013. "South African Sector Return Correlations: using DCC and ADCC Multivariate GARCH techniques to uncover the underlying dynamics," Working Papers 17/2013, Stellenbosch University, Department of Economics.
    21. Kalotychou, Elena & Staikouras, Sotiris K. & Zhao, Gang, 2014. "The role of correlation dynamics in sector allocation," Journal of Banking & Finance, Elsevier, vol. 48(C), pages 1-12.
    22. Cho, Sungjun & Hyde, Stuart & Nguyen, Ngoc, 2015. "Time-varying regional and global integration and contagion: Evidence from style portfolios," International Review of Financial Analysis, Elsevier, vol. 42(C), pages 109-131.
    23. Chen, Xiaoyu & Chiang, Thomas C., 2016. "Stock returns and economic forces—An empirical investigation of Chinese markets," Global Finance Journal, Elsevier, vol. 30(C), pages 45-65.

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