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Conditional Correlation Coefficient As A Tool For Analysis Of Contagion In Financial Markets And Real Economy Indexes Based On The Synthetic Ratio

Author

Listed:
  • Rafał SIEDLECKI

    (Department of Corporate Finance and Value Management Wroclaw University of Economics, Poland)

  • Daniel PAPLA

    (Department of Financial Investments and Risk Management Wroclaw University of Economics, Poland)

Abstract

We define contagion in financial markets as a significant increase in cross-market linkages after a shock to one or group of countries. Contagion occurs if cross-market co-movement increases significantly after the shock. The main goal of this paper is to analyze changes in dependence between a chosen world stock market and the constructed synthetic index. Subsequently the research hypothesis will be verified: dependence between the synthetic stock market index and other stock markets is increasing in periods of a rapid decrease in value of stock market indexes. Positive verification of this hypothesis means that there is a contagion in financial markets.

Suggested Citation

  • Rafał SIEDLECKI & Daniel PAPLA, 2016. "Conditional Correlation Coefficient As A Tool For Analysis Of Contagion In Financial Markets And Real Economy Indexes Based On The Synthetic Ratio," ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, Faculty of Economic Cybernetics, Statistics and Informatics, vol. 50(4), pages 287-299.
    • Handle: RePEc:cys:ecocyb:v:50:y:2016:i:4:p:287-299
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    References listed on IDEAS

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    More about this item

    Keywords

    contagion in financial markets; synthetic measurement; conditional measure of concordance.;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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