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No Contagion, only Globalization and Flight to Quality

  • Marie Briere
  • Ariane Chapelle
  • Ariane Szafarz

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.

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Paper provided by ULB -- Universite Libre de Bruxelles in its series ULB Institutional Repository with number 2013/149092.

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Date of creation: 2012
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Publication status: Published in: Journal of international money and finance (2012) v.31 n° 6,p.17291744
Handle: RePEc:ulb:ulbeco:2013/149092
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