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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.

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  • 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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    More about this item

    Keywords

    Market linkage; Information spillover; Volatility; Liquidity;
    All these keywords.

    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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