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Stock market linkages and financial contagion: A cobreaking analysis

Listed author(s):
  • Ahlgren, Niklas
  • Antell, Jan

Financial crises have shown that dramatic movements in one financial market can have a powerful impact on other markets. This paper proposes to use cobreaking to model comovements between stock markets during crises and to test for contagion. We find evidence of cobreaking between developed stock markets. In emerging stock markets, the evidence of cobreaking is mainly due to the non-financial event of the World Trade Center terrorist attacks in 2001. We find evidence of short-term linkages during times of crisis but not contagion. These short-term linkages have important implications for investors, risk managers and regulators.

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File URL: http://www.sciencedirect.com/science/article/pii/S1062-9769(09)00132-X
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Article provided by Elsevier in its journal The Quarterly Review of Economics and Finance.

Volume (Year): 50 (2010)
Issue (Month): 2 (May)
Pages: 157-166

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Handle: RePEc:eee:quaeco:v:50:y:2010:i:2:p:157-166
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620167

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  9. Niklas Ahlgren & Jan Antell, 2002. "Testing for cointegration between international stock prices," Applied Financial Economics, Taylor & Francis Journals, vol. 12(12), pages 851-861.
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  13. Rigobon, Roberto, 2003. "On the measurement of the international propagation of shocks: is the transmission stable?," Journal of International Economics, Elsevier, vol. 61(2), pages 261-283, December.
  14. Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(4), pages 369-380, October.
  15. Ahlgren, N. & Antell, J., 2008. "Bootstrap and fast double bootstrap tests of cointegration rank with financial time series," Computational Statistics & Data Analysis, Elsevier, vol. 52(10), pages 4754-4767, June.
  16. Perron, Pierre, 1989. "The Great Crash, the Oil Price Shock, and the Unit Root Hypothesis," Econometrica, Econometric Society, vol. 57(6), pages 1361-1401, November.
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  18. Karolyi, G. Andrew & Stulz, Rene M., 2003. "Are financial assets priced locally or globally?," Handbook of the Economics of Finance,in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 16, pages 975-1020 Elsevier.
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