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Causality and contagion in emerging stock markets

Author

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  • Emna Abdennadher
  • Slaheddine Hellara

Abstract

Given the evidence of occasional discrete shifts in the conditional variance process, it is essential to test the volatility transmission between financial markets when a reasonable suspicion exists for structural change. This paper aims to study the interdependencies in terms of stock market volatility and to assess the impact of Global Financial Crisis (GFC) on these interdependencies. We found evidence of structural breaks in the volatility of time series for the majority of markets. The results show also that, in view of the crisis, new significant causal linkages appeared together with the intensification of the causal relationship in 40% of the cases in which we find causality during both the tranquil and crisis period. These additional linkages during crisis periods in excess of those that arise during non-crisis periods contributes significantly in amplifying the international transmission of volatility and the risk of contagion.

Suggested Citation

  • Emna Abdennadher & Slaheddine Hellara, 2018. "Causality and contagion in emerging stock markets," Borsa Istanbul Review, Research and Business Development Department, Borsa Istanbul, vol. 18(4), pages 300-311, December.
    • Handle: RePEc:bor:bistre:v:18:y:2018:i:4:p:300-311
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    Citations

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    Cited by:

    1. Abubakar Jamaladeen & David E. Omoregie & Samuel F. Onipede & Nafiu A. Bashir, 2022. "A regime-switching skew-normal model of contagion in some selected stock markets," SN Business & Economics, Springer, vol. 2(12), pages 1-20, December.
    2. Banerjee, Ameet Kumar & Akhtaruzzaman, Md & Dionisio, Andreia & Almeida, Dora & Sensoy, Ahmet, 2022. "Nonlinear nexus between cryptocurrency returns and COVID-19 news sentiment," Journal of Behavioral and Experimental Finance, Elsevier, vol. 36(C).
    3. Jarosław Duda & Henryk Gurgul & Robert Syrek, 2022. "Multi-feature evaluation of financial contagion," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 30(4), pages 1167-1194, December.
    4. Kalu O. Emenike, 2021. "Interdependence among West African stock markets: A dimension of regional financial integration," African Development Review, African Development Bank, vol. 33(2), pages 288-299, June.
    5. Krzysztof Brania & Henryk Gurgul, 2021. "Contagion effects on capital and forex markets around GFC and COVID-19 crises. A comparative study," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 31(2), pages 59-92.
    6. Bago, Jean-Louis & Souratié, Wamadini M. & Ouédraogo, Moussa & Ouédraogo, Ernest & Dembélé, Alou, 2019. "Financial Bubbles : New Evidence from South Africa’s Stock Market," MPRA Paper 95685, University Library of Munich, Germany.
    7. Abayomi Oredegbe & Oye Abioye, 2022. "Stock Market Volatility and Persistence: Evidence from High-Income and Middle-Income Economies," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 14(8), pages 1-56, August.

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