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Is there life in the old dogs yet? Making break-tests work on financial contagion

  • Bartosz Gębka

    ()

  • Michail Karoglou

    ()

Many tests of financial contagion require a definition of the dates separating calm from crisis periods. We propose to use a battery of break search procedures for individual time series to objectively identify potential break dates in relationships between countries. Applied to the biggest European stock markets and combined with two well established tests for financial contagion, this approach results in break dates which correctly identify the timing of changes in cross-country transmission mechanisms. Application of break search procedures breathes new life into the established contagion tests, allowing for an objective, data-driven timing of crisis periods. Copyright Springer Science+Business Media, LLC 2013

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File URL: http://hdl.handle.net/10.1007/s11156-012-0278-z
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Article provided by Springer in its journal Review of Quantitative Finance and Accounting.

Volume (Year): 40 (2013)
Issue (Month): 3 (April)
Pages: 485-507

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Handle: RePEc:kap:rqfnac:v:40:y:2013:i:3:p:485-507
Contact details of provider: Web page: http://springerlink.metapress.com/link.asp?id=102990

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  1. Elena Andreou & Eric Ghysels, 2001. "Detecting Mutiple Breaks in Financial Market Volatility Dynamics," CIRANO Working Papers 2001s-65, CIRANO.
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