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Financial contagion in the subprime crisis context: A copula approach

Author

Listed:
  • Zorgati, Imen
  • Lakhal, Faten
  • Zaabi, Elmoez

Abstract

This paper investigates the financial contagion phenomenon and its intensity in the context of the subprime crisis by adopting the copulas approach. The wavelet technique is used to predict the accurate occurrence of the subprime crisis. To estimate the parameters of the different copulas, we use the canonical maximum likelihood method (CML). Based on the daily returns of stock market indices of five American countries (Brazil, Argentina, Mexico, Canada and the USA) and nine Asian countries (Japan, Hong Kong, India, Australia, Indonesia, Malaysia, Korea, China and Singapore) from 01/01/2003 to 30/12/2011, our results show that the contagion effect exists for all American markets as well as the Indian, Australian, Indonesian, Malaysian, Chinese and Singaporean ones. The findings also show that American markets record high levels of contagion intensity in comparison to their Asian counterparts. This study also confirms the contagious nature of the subprime crisis between USA and both American and Asian countries.

Suggested Citation

  • Zorgati, Imen & Lakhal, Faten & Zaabi, Elmoez, 2019. "Financial contagion in the subprime crisis context: A copula approach," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 269-282.
  • Handle: RePEc:eee:ecofin:v:47:y:2019:i:c:p:269-282
    DOI: 10.1016/j.najef.2018.11.014
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    References listed on IDEAS

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    More about this item

    Keywords

    Contagion; Intensity; CML; Copula; Subprime crisis;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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