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No contagion, only globalization and flight to quality

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  • Marie Briere
  • Ariane Chapelle
  • Ariane Szafarz

Abstract

In this article, tests for globalization and contagion are separated using an ex ante definition of crises, and contagion tests are neutralized with respect to globalization effects. A large database is constructed to study the stability of correlation matrices for four asset classes: equities, government bonds, investment-grade corporate bonds, and high-yield corporate bonds, in four geographical zones. Overall, the results confirm the instability of correlations and point to a combination of globalization and flight to quality, while emphasizing that contagion on the equity markets appears as an artifact due to globalization.

Suggested Citation

  • Marie Briere & Ariane Chapelle & Ariane Szafarz, 2012. "No contagion, only globalization and flight to quality," Working Papers CEB 12-010, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:sol:wpaper:2013/113071
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    More about this item

    Keywords

    contagion; globalization; flight to quality; crisis; diversification; correlation;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

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