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Contagion and portfolio shift in emerging countries' sovereign bonds

Author

Listed:
  • Antonio Díez de los Ríos

    () (CEMFI)

  • Alicia García Herrero

    () (Banco de España)

Abstract

The paper tests whether there were events of contagion, and portfolio shift, in the sovereign bond markets of eleven emerging countries' between January 1995 and November 2001. From existing definitions, we narrow down the concept of contagion by focusing on pricing errors, after general market movements haven been taken into account with a three factor asset pricing model. We measure contagion (and portfolio shift) in terms of a causal positive (negative) dynamic co movement between sovereign bond pricing errors. Downgrades of sovereign ratings are used as proxies for a shock. We find empirical support for contagion and portfolio shift for a number of countries on the basis of our definition.

Suggested Citation

  • Antonio Díez de los Ríos & Alicia García Herrero, 2003. "Contagion and portfolio shift in emerging countries' sovereign bonds," Working Papers 0317, Banco de España;Working Papers Homepage.
  • Handle: RePEc:bde:wpaper:0317
    as

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    File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/03/Fic/dt0317e.pdf
    File Function: First version, December 2003
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    References listed on IDEAS

    as
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    Cited by:

    1. Angelo Marsiglia Fasolo, 2006. "Interdependence and Contagion: an Analysis of Information Transmission in Latin America's Stock Markets," Working Papers Series 112, Central Bank of Brazil, Research Department.

    More about this item

    Keywords

    Financial linkages; financial crisis; Granger causality; international asset pricing;

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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