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Contagion of the Subprime Financial Crisis on Frontier Stock Markets: A Copula Analysis

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  • Wahbeeah Mohti

    () (Department of Management, Universidade de Évora, 7000-812 Évora, Portugal)

  • Andreia Dionísio

    () (Department of Management, Universidade de Évora, 7000-812 Évora, Portugal
    CEFAGE, Universidade de Évora, 7000-812 Évora, Portugal)

  • Paulo Ferreira

    () (CEFAGE, Universidade de Évora, 7000-812 Évora, Portugal
    VALORIZA—Research Center for Endogenous Resource Valorization, 7300-110 Portalegre, Portugal)

  • Isabel Vieira

    (CEFAGE, Universidade de Évora, 7000-812 Évora, Portugal
    Department of Economics, Universidade de Évora, 7000-812 Évora, Portugal)

Abstract

This study assesses contagion from the USA subprime financial crisis on a large set of frontier stock markets. Copula models were used to investigate the structure of dependence between frontier markets and the USA, before and after the occurrence of the crisis. Statistically significant evidence of contagion could only be found in the European region, with the markets of Croatia and Romania being affected. The remaining European markets in our sample and the others, located in America, Middle East, Africa, and Asia, appear to have been isolated from the subprime crisis impact. These results are useful for international investors interested in enlarging the geographical diversification of their portfolios, but also for the considered countries’ policymakers who should attempt to improve the attractiveness of stock markets for domestic and foreign investors while simultaneously attempting to maintain their relative level of insulation against future foreign crises.

Suggested Citation

  • Wahbeeah Mohti & Andreia Dionísio & Paulo Ferreira & Isabel Vieira, 2019. "Contagion of the Subprime Financial Crisis on Frontier Stock Markets: A Copula Analysis," Economies, MDPI, Open Access Journal, vol. 7(1), pages 1-14, February.
  • Handle: RePEc:gam:jecomi:v:7:y:2019:i:1:p:15-:d:209311
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    References listed on IDEAS

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    More about this item

    Keywords

    copula models; financial contagion; financial crises; frontier markets;

    JEL classification:

    • E - Macroeconomics and Monetary Economics
    • F - International Economics
    • I - Health, Education, and Welfare
    • J - Labor and Demographic Economics
    • O - Economic Development, Innovation, Technological Change, and Growth
    • Q - Agricultural and Natural Resource Economics; Environmental and Ecological Economics

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