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Contagion Effects of the Subprime Crisis in the European Nyse-Euronext Markets

  • Paulo Horta

    (Comissão do Mercado de Valores Mobiliários)

  • Carlos Mendes

    (UNINOVA - DEE, Universidade Nova de Lisboa)

  • Isabel Vieira

    ()

    (Universidade de Evora, Departamento de Gestão, CEFAGE-UE)

This paper presents three tests of contagion of the US subprime crisis to the European markets of the NYSE-Euronext group. Copula models are used to analyse dependence structures between the US's and the other markets in the sample, in the pre-crisis and in the subprime crisis periods. The first test assesses the existence of contagion on the relevant markets' indices, the second checks the homogeneity of contagion intensities, and the third compares contagion in financial and in industrial sectors' indices. Results suggest that contagion exists, and is equally felt, in most markets and that investors anticipated a spreading of the financial crisis to the real economy, long before such dissemination was observable.

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Paper provided by University of Evora, CEFAGE-UE (Portugal) in its series CEFAGE-UE Working Papers with number 2009_01.

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Length: 24 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:cfe:wpcefa:2009_01
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  1. Kole, Erik & Koedijk, Kees & Verbeek, Marno, 2007. "Selecting copulas for risk management," Journal of Banking & Finance, Elsevier, vol. 31(8), pages 2405-2423, August.
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  15. Ling Hu, 2006. "Dependence patterns across financial markets: a mixed copula approach," Applied Financial Economics, Taylor & Francis Journals, vol. 16(10), pages 717-729.
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