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Asset Market Linkages in Crisis Periods

  • de Vries, Casper G
  • Hartmann, Philipp
  • Straetmans, Stefan

We characterize asset return linkages during periods of stress by an extremal dependence measure. Contrary to correlation analysis, this non-parametric measure is not predisposed towards the normal distribution and can account for non-linear relationships. Our estimates for the G-5 countries suggest that simultaneous crashes in stock markets are about two times more likely than in bond markets. Moreover, stock-bond contagion is about as frequent as flight to quality from stocks into bonds. Extreme cross-border linkages are surprisingly similar to national linkages, illustrating a potential downside to international financial integration.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2916.

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Date of creation: Aug 2001
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Handle: RePEc:cpr:ceprdp:2916
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