Markets contagion during financial crisis: A regime-switching approach
Within a Markov regime-switching VAR framework, we investigate the contagion effects among the stock market, real estate market, credit default market, and energy market covering the most recent financial crisis period when markets experience regime shifts. The results demonstrate that the watershed of regimes occurs around the start of the subprime crisis in 2007, after which the "risky" regime dominates the evolution of market chaos. During the financial crisis, excluding their own shocks, stock market shock and oil price shock are the main driving forces behind the credit default market and stock market variations, respectively. The energy market also appears to be more responsive to the stock market movements than the shocks originating from housing and credit markets. However, the impacts from the credit default market on the real estate market are not significant as expected.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Viral V. Acharya & Lasse Heje Pedersen, 2004.
"Asset Pricing with Liquidity Risk,"
NBER Working Papers
10814, National Bureau of Economic Research, Inc.
- Guo, Feng & Huang, Ying Sophie, 2010. "Does "hot money" drive China's real estate and stock markets?," International Review of Economics & Finance, Elsevier, vol. 19(3), pages 452-466, June.
- John Y. Campbell & Pierre Perron, 1991.
"Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots,"
NBER Technical Working Papers
0100, National Bureau of Economic Research, Inc.
- John Y. Campbell & Pierre Perron, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know About Unit Roots," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 141-220 National Bureau of Economic Research, Inc.
- Campbell, J.Y. & Perron, P., 1991. "Pitfalls and Opportunities: What Macroeconomics should know about unit roots," Papers 360, Princeton, Department of Economics - Econometric Research Program.
- Campbell, John & Perron, Pierre, 1991. "Pitfalls and Opportunities: What Macroeconomists Should Know about Unit Roots," Scholarly Articles 3374863, Harvard University Department of Economics.
- Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
- Ehrmann, Michael & Ellison, Martin & Valla, Natacha, 2003.
"Regime-dependent impulse response functions in a Markov-switching vector autoregression model,"
Elsevier, vol. 78(3), pages 295-299, March.
- Ehrmann , Michael & Ellison, Martin & Valla, Natacha, 2001. "Regime-dependent impulse response functions in a Markov-switching vector autoregression model," Research Discussion Papers 11/2001, Bank of Finland.
- Tom Doan, . "RATS program to replicate Ehrmann-Ellison-Valla(2003) regime dependent impulse response," Statistical Software Components RTZ00177, Boston College Department of Economics.
- Mardi Dungey & Diana Zhumabekova, 2001. "Testing for contagion using correlations: some words of caution," Pacific Basin Working Paper Series 2001-09, Federal Reserve Bank of San Francisco.
- Daniel C. Quan & Sheridan Titman, 1999. "Do Real Estate Prices and Stock Prices Move Together? An International Analysis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 27(2), pages 183-207.
- Hooker, Mark A, 2002. "Are Oil Shocks Inflationary? Asymmetric and Nonlinear Specifications versus Changes in Regime," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 540-61, May.
- Nobuhiro Kiyotaki & John Moore, 2002. "Balance-Sheet Contagion," American Economic Review, American Economic Association, vol. 92(2), pages 46-50, May.
- Francis A. Longstaff & Sanjay Mithal & Eric Neis, 2005.
"Corporate Yield Spreads: Default Risk or Liquidity? New Evidence from the Credit Default Swap Market,"
Journal of Finance,
American Finance Association, vol. 60(5), pages 2213-2253, October.
- Francis A. Longstaff & Sanjay Mithal & Eric Neis, 2004. "Corporate Yield Spreads: Default Risk or Liquidity? New Evidence from the Credit-Default Swap Market," NBER Working Papers 10418, National Bureau of Economic Research, Inc.
- Kostas Tsatsaronis & Haibin Zhu, 2004. "What drives housing price dynamics: cross-country evidence," BIS Quarterly Review, Bank for International Settlements, March.
- David C. Ling & Andy Naranjo, 1999. "The Integration of Commercial Real Estate Markets and Stock Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 27(3), pages 483-515.
- Laura E. Kodres & Matthew Pritsker, 2002. "A Rational Expectations Model of Financial Contagion," Journal of Finance, American Finance Association, vol. 57(2), pages 769-799, 04.
When requesting a correction, please mention this item's handle: RePEc:eee:reveco:v:20:y:2011:i:1:p:95-109. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.