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Market linkage and information spillover: Evidence from pre-crisis, crisis, and recovery periods

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  • Ding, Liang
  • Pu, Xiaoling

Abstract

We examine market linkage and information spillover across the U.S. stock, corporate bond, and credit derivatives markets in the pre-crisis, crisis, and recovery periods. Our results suggest that information spills over across markets in a timely manner. We find that the market linkage becomes stronger in the crisis period, which could be explained by the increasing volatility and deteriorating funding liquidity. In particular, volatility plays a dominant role in the information transmission, which absorbs the liquidity effect when both volatility and liquidity are included as exogenous factors in a vector autoregressive model.

Suggested Citation

  • Ding, Liang & Pu, Xiaoling, 2012. "Market linkage and information spillover: Evidence from pre-crisis, crisis, and recovery periods," Journal of Economics and Business, Elsevier, vol. 64(2), pages 145-159.
  • Handle: RePEc:eee:jebusi:v:64:y:2012:i:2:p:145-159
    DOI: 10.1016/j.jeconbus.2011.11.001
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    References listed on IDEAS

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    Cited by:

    1. Lixiong Shi, 2016. "Research of coupling effects between the offshore RMB exchange rate and onshore exchange rate," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 6(8), pages 201-209, August.
    2. repec:eee:finana:v:52:y:2017:i:c:p:104-118 is not listed on IDEAS
    3. Sui, Lu & Sun, Lijuan, 2016. "Spillover effects between exchange rates and stock prices: Evidence from BRICS around the recent global financial crisis," Research in International Business and Finance, Elsevier, vol. 36(C), pages 459-471.
    4. Gilenko, Evgenii & Fedorova, Elena, 2014. "Internal and external spillover effects for the BRIC countries: Multivariate GARCH-in-mean approach," Research in International Business and Finance, Elsevier, vol. 31(C), pages 32-45.
    5. Wengner, Andreas & Burghof, Hans-Peter & Schneider, Johannes, 2015. "The impact of credit rating announcements on corporate CDS markets—Are intra-industry effects observable?," Journal of Economics and Business, Elsevier, vol. 78(C), pages 79-91.
    6. Delcoure, Natalya (Natasha) & Singh, Harmeet, 2016. "BRIC or CBRI: It just doesn’t sound as sexy, does it?," The Quarterly Review of Economics and Finance, Elsevier, vol. 61(C), pages 230-239.
    7. Abu Bakar, Norhidayah & Masih, Abul Mansur M., 2014. "The Dynamic Linkages between Islamic Index and the Major Stock Markets: New Evidence from Wavelet time-scale decomposition Analysis," MPRA Paper 56977, University Library of Munich, Germany.

    More about this item

    Keywords

    Market linkage; Information spillover; Volatility; Liquidity;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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