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Testing the Hypothesis of Contagion using Multivariate Volatility Models

  • Marçal, Emerson F.
  • Valls Pereira, Pedro L.

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

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File URL: https://mpra.ub.uni-muenchen.de/15623/1/MPRA_paper_15623.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 15623.

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Date of creation: Aug 2008
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Publication status: Published in Brazilian Review of Econometrics 2.28(2008): pp. 21-34
Handle: RePEc:pra:mprapa:15623
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  7. 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.
  8. Franses,Philip Hans & Dijk,Dick van, 2000. "Non-Linear Time Series Models in Empirical Finance," Cambridge Books, Cambridge University Press, number 9780521779654.
  9. Paul Masson, 1999. "Multiple equilibria, contagion, and the emerging market crises," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
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  12. 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.
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  17. Reinhart, Carmen & Calvo, Sara, 1996. "Capital Flows to Latin America: Is There Evidence of Contagion Effects?”," MPRA Paper 7124, University Library of Munich, Germany.
  18. 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.
  19. 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).
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