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Testing for Contagion in International Financial Markets: To See More, Go Higher

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  • Simeon Coleman
  • Vitor Leone

Abstract

Traditional measures of financial contagion rely on correlation shifts, overlooking higher moments such as skewness and kurtosis. We examine contagion during two major financial crises, incorporating lower‐ and higher‐moment measures. We analyze stock market returns from 22 major markets at different frequencies, offering a global perspective often missing in previous studies. Employing higher‐order dependence measures, we demonstrate that conventional methods risk losing valuable information. Our contagion networks highlight how shocks travel outward. We find no systematic differences between developed and less‐developed economies’ vulnerability and stress the need for utilizing higher‐order measures when assessing financial stability to avoid underestimating contagion risks.

Suggested Citation

  • Simeon Coleman & Vitor Leone, 2026. "Testing for Contagion in International Financial Markets: To See More, Go Higher," The Financial Review, Eastern Finance Association, vol. 61(3), pages 725-763, August.
    • Handle: RePEc:bla:finrev:v:61:y:2026:i:3:p:725-763
    DOI: 10.1111/fire.70037
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