Testing the hypothesis of contagion using multivariate volatility models
The aim of this paper is to test whether or not there was evidence of contagion across the various financial crises that assailed some countries in the 1990s. Data on sovereign debt bonds for Brazil, Mexico, Russia and Argentina were used to implement the test. The contagion hypothesis is tested using multivariate volatility models. If there is any evidence of structural break in volatility that can be linked to financial crises, the contagion hypothesis will be confirmed. Results suggest that there is evidence in favor of the contagion hypothesis.
|Date of creation:||26 Jan 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 55 (011) 3799-3350
Fax: 55 (011) 3799-3357
Web page: http://eesp.fgv.br
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Issler, João Victor, 1999. "Estimating and Forecasting the Volatility of Brazilian Finance Series Using Arch Models (Preliminary Version)," Economics Working Papers (Ensaios Economicos da EPGE) 347, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Vance L. Martin & Brenda Gonzalez-Hermosillo, & Mardi Dungey & Renee A. Fry, 2004.
"Empirical Modelling of Contagion: A Review of Methodologies,"
Econometric Society 2004 Australasian Meetings
243, Econometric Society.
- Mardi Dungey & Renee Fry & Brenda Gonzalez-Hermosillo & Vance Martin, 2005. "Empirical modelling of contagion: a review of methodologies," Quantitative Finance, Taylor & Francis Journals, vol. 5(1), pages 9-24.
- Mardi Dungey & Renee Fry & Vance Martin & Brenda GonzÃ¡lez-Hermosillo, 2004. "Empirical Modeling of Contagion; A Review of Methodologies," IMF Working Papers 04/78, International Monetary Fund.
- Martin, V. & Dungey & M., 2004. "Empirical Modelling of Contagion: A Review of Methodologies," Econometric Society 2004 Far Eastern Meetings 574, Econometric Society.
- Engle, Robert F & Kozicki, Sharon, 1993. "Testing for Common Features: Reply," Journal of Business & Economic Statistics, American Statistical Association, vol. 11(4), pages 393-95, October.
- Engle, Robert F & Sheppard, Kevin K, 2001.
"Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH,"
University of California at San Diego, Economics Working Paper Series
qt5s2218dp, Department of Economics, UC San Diego.
- Robert F. Engle & Kevin Sheppard, 2001. "Theoretical and Empirical properties of Dynamic Conditional Correlation Multivariate GARCH," NBER Working Papers 8554, National Bureau of Economic Research, Inc.
- BAUWENS, Luc & LAURENT, Sébastien & ROMBOUTS, Jeroen, 2003.
"Multivariate GARCH models: a survey,"
CORE Discussion Papers
2003031, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Tim Bollerslev, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
EERI Research Paper Series
EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
- Paul R. Masson, 1998. "Contagion; Monsoonal Effects, Spillovers, and Jumps Between Multiple Equilibria," IMF Working Papers 98/142, International Monetary Fund.
- Marcello Pericoli & Massimo Sbracia, 2003.
"A Primer on Financial Contagion,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 17(4), pages 571-608, 09.
- Pedro L. Valls Pereira & Hotta, L.K. & Souza, L.A.R., 1999. "Alternative Models to extract asset volatility: a comparative study," Finance Lab Working Papers flwp_14, Finance Lab, Insper Instituto de Ensino e Pesquisa.
- Carmen M. Reinhart & Sara Calvo, 1996.
"Capital Flows to Latin America: Is There Evidence of Contagion Effects?,"
Peterson Institute Press: Chapters,
in: Guillermo A. Calvo & Morris Goldstein & Eduard Hochreiter (ed.), Private Capital Flows to Emerging Markets After the Mexican Crisis, pages 151-171
Peterson Institute for International Economics.
- Reinhart, Carmen & Calvo, Sara, 1996. "Capital Flows to Latin America: Is There Evidence of Contagion Effects?”," MPRA Paper 7124, University Library of Munich, Germany.
- Calvo, Sara & Reinhart, Carmen, 1996. "Capital flows to Latin America : Is there evidence of contagion effects?," Policy Research Working Paper Series 1619, The World Bank.
- Harvey, Andrew & Ruiz, Esther & Shephard, Neil, 1994.
"Multivariate Stochastic Variance Models,"
Review of Economic Studies,
Wiley Blackwell, vol. 61(2), pages 247-64, April.
- Tom Doan, . "RATS programs to estimate multivariate stochastic volatility models," Statistical Software Components RTZ00093, Boston College Department of Economics.
- Bollerslev, Tim & Engle, Robert F & Wooldridge, Jeffrey M, 1988. "A Capital Asset Pricing Model with Time-Varying Covariances," Journal of Political Economy, University of Chicago Press, vol. 96(1), pages 116-31, February.
- repec:cup:cbooks:9780521779654 is not listed on IDEAS
- Paul R. Masson, 1999.
"Multiple Equilibria, Contagion, and the Emerging Market Crises,"
IMF Working Papers
99/164, International Monetary Fund.
- Paul Masson, 1999. "Multiple equilibria, contagion, and the emerging market crises," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
- Engle, Robert F & Kozicki, Sharon, 1993.
"Testing for Common Features,"
Journal of Business & Economic Statistics,
American Statistical Association, vol. 11(4), pages 369-80, October.
- Tse, Y. K., 2000.
"A test for constant correlations in a multivariate GARCH model,"
Journal of Econometrics,
Elsevier, vol. 98(1), pages 107-127, September.
- Tom Doan, . "RATS programs to replicate Tse's constant correlation GARCH test results," Statistical Software Components RTZ00161, Boston College Department of Economics.
- Tom Doan, . "TSECCTEST: RATS procedure to perform Tse test for constant correlation in MV-GARCH model," Statistical Software Components RTS00214, Boston College Department of Economics.
- Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
- Kristin J. Forbes & Roberto Rigobon, 2002.
"No Contagion, Only Interdependence: Measuring Stock Market Comovements,"
Journal of Finance,
American Finance Association, vol. 57(5), pages 2223-2261, October.
- Kristin Forbes & Roberto Rigobon, 1999. "No Contagion, Only Interdependence: Measuring Stock Market Co-movements," NBER Working Papers 7267, National Bureau of Economic Research, Inc.
- Engle, Robert, 2002. "Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 339-50, July.
- Engle, Robert F. & Kroner, Kenneth F., 1995. "Multivariate Simultaneous Generalized ARCH," Econometric Theory, Cambridge University Press, vol. 11(01), pages 122-150, February.
- Dornbusch, Rudiger & Park, Yung Chul & Claessens, Stijn, 2000. "Contagion: Understanding How It Spreads," World Bank Research Observer, World Bank Group, vol. 15(2), pages 177-97, August.
- Corsetti, Giancarlo & Pericoli, Marcello & Sbracia, Massimo, 2002.
"Some Contagion, Some Interdependence: More Pitfalls in Tests of Financial Contagion,"
CEPR Discussion Papers
3310, C.E.P.R. Discussion Papers.
- Corsetti, Giancarlo & Pericoli, Marcello & Sbracia, Massimo, 2005. "'Some contagion, some interdependence': More pitfalls in tests of financial contagion," Journal of International Money and Finance, Elsevier, vol. 24(8), pages 1177-1199, December.
- Tse, Y K & Tsui, Albert K C, 2002. "A Multivariate Generalized Autoregressive Conditional Heteroscedasticity Model with Time-Varying Correlations," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 351-62, July.
- Wooldridge, Jeffrey M., 1990. "A Unified Approach to Robust, Regression-Based Specification Tests," Econometric Theory, Cambridge University Press, vol. 6(01), pages 17-43, March.
When requesting a correction, please mention this item's handle: RePEc:fgv:eesptd:174. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Núcleo de Computação da EPGE)
If references are entirely missing, you can add them using this form.