IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

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.

To our knowledge, this item is not available for download. To find whether it is available, there are three options:
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.

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

as
in new window

Length:
Date of creation: 2012
Date of revision:
Publication status: Published in: Journal of international money and finance (2012) v.31 n° 6,p.17291744
Handle: RePEc:ulb:ulbeco:2013/149092
Contact details of provider: Postal: CP135, 50, avenue F.D. Roosevelt, 1050 Bruxelles
Web page: http://difusion.ulb.ac.be

More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. José De Gregorio, 1999. "Exchange Rate Policy in Chile since 1960: Political Economy and The Choice of Regime," Documentos de Trabajo 68, Centro de Economía Aplicada, Universidad de Chile.
  2. Bekaert, Geert & Hodrick, Robert J & Zhang, Xiaoyan, 2006. "International Stock Return Comovements," CEPR Discussion Papers 5955, C.E.P.R. Discussion Papers.
  3. Fernando A. Broner & R. Gaston Gelos & Carmen Reinhart, 2004. "When in Peril, Retrench: Testing the Portfolio Channel of Contagion," NBER Working Papers 10941, National Bureau of Economic Research, Inc.
  4. Dirk Baur & Brian M. Lucey, 2006. "Flight-to-quality or Contagion? An EmpiricalAnalysis of Stock-bond correlations," The Institute for International Integration Studies Discussion Paper Series iiisdp122, IIIS.
  5. Dungey, Mardi & Fry, Renee & Gonzalez-Hermosillo, Brenda & Martin, Vance, 2006. "Contagion in international bond markets during the Russian and the LTCM crises," Journal of Financial Stability, Elsevier, vol. 2(1), pages 1-27, April.
  6. Guillermo A. Calvo & Enrique G. Mendoza, 1999. "Regional Contagion and the Globalization of Securities Markets," NBER Working Papers 7153, National Bureau of Economic Research, Inc.
  7. Gordon J. Alexander & Amy K. Edwards & Michael G. Ferri, 2000. "What Does Nasdaq's High Yield Bond Market Reveal about Bondholder-Shareholder Conflict?," Financial Management, Financial Management Association, vol. 29(1), Spring.
  8. Ariane Szafarz, 2010. "Financial Crises in Efficient Markets: How Fundamentalists Fuel Volatility," Working Papers CEB 10-052, ULB -- Universite Libre de Bruxelles.
  9. Bartram, Söhnke M. & Bodnar, Gordon M., 2009. "No place to hide: The global crisis in equity markets in 2008/2009," Journal of International Money and Finance, Elsevier, vol. 28(8), pages 1246-1292, December.
  10. Markus K. Brunnermeier, 2008. "Deciphering the Liquidity and Credit Crunch 2007-08," NBER Working Papers 14612, National Bureau of Economic Research, Inc.
  11. Robert-Paul Berben & W. Jos Jansen, 2003. "Comovement in international equity markets: A sectoral view," Finance 0310001, EconWPA.
  12. Graciela L. Kaminsky & Sergio L. Schmukler, 1999. "What triggers market jitters: a chronicle of the Asian crisis," International Finance Discussion Papers 634, Board of Governors of the Federal Reserve System (U.S.).
  13. Goldstein, Itay & Pauzner, Ady, 2004. "Contagion of self-fulfilling financial crises due to diversification of investment portfolios," Journal of Economic Theory, Elsevier, vol. 119(1), pages 151-183, November.
  14. Lin, Wen-Ling & Engle, Robert F & Ito, Takatoshi, 1994. "Do Bulls and Bears Move across Borders? International Transmission of Stock Returns and Volatility," Review of Financial Studies, Society for Financial Studies, vol. 7(3), pages 507-38.
  15. Marie Briere & Ariane Szafarz, 2008. "Crisis-Robust Bond Portfolios," ULB Institutional Repository 2013/14150, ULB -- Universite Libre de Bruxelles.
  16. 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.
  17. Christos S. Savva & Denise R. Osborn & Len Gill, 2006. "Periodic Dynamic Conditional Correlations between Stock Markets in Europe and the US," The School of Economics Discussion Paper Series 0629, Economics, The University of Manchester.
  18. Geert Bekaert & Campbell R. Harvey, 2003. "Market Integration and Contagion," NBER Working Papers 9510, National Bureau of Economic Research, Inc.
  19. William N. Goetzmann & Lingfeng Li & K. Geert Rouwenhorst, 2001. "Long-Term Global Market Correlations," NBER Working Papers 8612, National Bureau of Economic Research, Inc.
  20. Oecd, 2007. "Financial Markets Highlights - May 2007," Financial Market Trends, OECD Publishing, vol. 2007(1), pages 11-22.
  21. Michael Bordo & Anna Schwartz, 1996. "Why clashes between internal and external stability goals end in currency crises, 1797–1994," Open Economies Review, Springer, vol. 7(1), pages 437-468, March.
  22. Laura E. Kodres & Matthew Pritsker, 2002. "A Rational Expectations Model of Financial Contagion," Journal of Finance, American Finance Association, vol. 57(2), pages 769-799, 04.
  23. Philipp Hartmann & Stefan Straetmans & Casper G. de Vries, 2001. "Asset market linkages in crisis periods," Proceedings 727, Federal Reserve Bank of Chicago.
  24. Marcello Pericoli & Massimo Sbracia, 2003. "A Primer on Financial Contagion," Journal of Economic Surveys, Wiley Blackwell, vol. 17(4), pages 571-608, 09.
  25. Caporale, Guglielmo Maria & Cipollini, Andrea & Spagnolo, Nicola, 2005. "Testing for contagion: a conditional correlation analysis," Journal of Empirical Finance, Elsevier, vol. 12(3), pages 476-489, June.
  26. Michael D. Bordo & Anna J. Schwartz, 1996. "Why Clashes Between Internal and External Stability Goals End in Currency Crises, 1797-1994," NBER Working Papers 5710, National Bureau of Economic Research, Inc.
  27. Adam, M C & Szafarz, A, 1992. "Speculative Bubbles and Financial Markets," Oxford Economic Papers, Oxford University Press, vol. 44(4), pages 626-40, October.
  28. Chakrabarti, Rajesh & Roll, Richard, 2002. "East Asia and Europe during the 1997 Asian collapse: a clinical study of a financial crisis," Journal of Financial Markets, Elsevier, vol. 5(1), pages 1-30, January.
  29. Monica Billio & Massimiliano Caporin, 2007. "Market linkages, variance spillovers and correlation stability: empirical evidences of financial contagion," Working Papers 2007_18, Department of Economics, University of Venice "Ca' Foscari".
  30. Oecd, 2007. "Financial Markets Highlights November 2007," Financial Market Trends, OECD Publishing, vol. 2007(2), pages 11-25.
  31. Mardi Dungey & Renee Fry & Vance L. Martin, 2004. "Currency Market Contagion In The Asia-Pacific Region," Australian Economic Papers, Wiley Blackwell, vol. 43(4), pages 379-395, December.
  32. Morana, Claudio & Beltratti, Andrea, 2008. "Comovements in international stock markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 18(1), pages 31-45, February.
  33. D. Sornette & Y. Malevergne, 2001. "From Rational Bubbles to Crashes," Papers cond-mat/0102305, arXiv.org.
  34. Longin, Francois & Solnik, Bruno, 1995. "Is the correlation in international equity returns constant: 1960-1990?," Journal of International Money and Finance, Elsevier, vol. 14(1), pages 3-26, February.
  35. Fama, Eugene F. & French, Kenneth R., 1993. "Common risk factors in the returns on stocks and bonds," Journal of Financial Economics, Elsevier, vol. 33(1), pages 3-56, February.
  36. Chesnay, F. & Jondeau, E., 2000. "Does Correlation between Stock Returns Really Increase during Turbulent Period?," Working papers 73, Banque de France.
  37. Chakrabarti, Rajesh & Roll, Richard, 2002. "East Asia and Europe During the 1997 Asian Collapse: A Clinical Study of a Financial Crisis," University of California at Los Angeles, Anderson Graduate School of Management qt09f9j331, Anderson Graduate School of Management, UCLA.
  38. Kaplanis, Evi C., 1988. "Stability and forecasting of the comovement measures of international stock market returns," Journal of International Money and Finance, Elsevier, vol. 7(1), pages 63-75, March.
  39. 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.
  40. Candelon, Bertrand & Hecq, Alain & Verschoor, Willem F.C., 2005. "Measuring common cyclical features during financial turmoil: Evidence of interdependence not contagion," Journal of International Money and Finance, Elsevier, vol. 24(8), pages 1317-1334, December.
  41. d'Addona, Stefano & Kind, Axel H., 2006. "International stock-bond correlations in a simple affine asset pricing model," Journal of Banking & Finance, Elsevier, vol. 30(10), pages 2747-2765, October.
  42. Flavin, Thomas J. & Panopoulou, Ekaterini, 2009. "On the robustness of international portfolio diversification benefits to regime-switching volatility," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(1), pages 140-156, February.
  43. Dooley, Michael & Hutchison, Michael, 2009. "Transmission of the U.S. subprime crisis to emerging markets: Evidence on the decoupling-recoupling hypothesis," Journal of International Money and Finance, Elsevier, vol. 28(8), pages 1331-1349, December.
  44. Campbell, Rachel A.J. & Forbes, Catherine S. & Koedijk, Kees G. & Kofman, Paul, 2008. "Increasing correlations or just fat tails?," Journal of Empirical Finance, Elsevier, vol. 15(2), pages 287-309, March.
  45. Sébastien WÄLTI, 2003. "Testing for Contagion in International Financial Markets: Which Way to Go?," FAME Research Paper Series rp92, International Center for Financial Asset Management and Engineering.
  46. Jan Annaert & Anouk Claes & Marc De Ceuster, 2006. "Intertemporal stability of the European credit spread co-movement structure1," The European Journal of Finance, Taylor & Francis Journals, vol. 12(1), pages 23-32.
  47. De Santis, Giorgio & Gerard, Bruno, 1997. " International Asset Pricing and Portfolio Diversification with Time-Varying Risk," Journal of Finance, American Finance Association, vol. 52(5), pages 1881-1912, December.
  48. François Longin, 2001. "Extreme Correlation of International Equity Markets," Journal of Finance, American Finance Association, vol. 56(2), pages 649-676, 04.
  49. Shackman, Joshua D., 2006. "The equity premium and market integration: Evidence from international data," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 16(2), pages 155-179, April.
  50. A. Can Inci & H.C. Li & Joseph McCarthy, 2011. "Measuring flight to quality: a local correlation analysis," Review of Accounting and Finance, Emerald Group Publishing, vol. 10(1), pages 69 - 87, February.
  51. P. Silvapulle & C. W. J. Granger, 2001. "Large returns, conditional correlation and portfolio diversification: a value-at-risk approach," Quantitative Finance, Taylor & Francis Journals, vol. 1(5), pages 542-551.
  52. Okimoto, Tatsuyoshi, 2008. "New Evidence of Asymmetric Dependence Structures in International Equity Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 43(03), pages 787-815, September.
  53. Connolly, Robert & Stivers, Chris & Sun, Licheng, 2005. "Stock Market Uncertainty and the Stock-Bond Return Relation," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(01), pages 161-194, March.
  54. Stefan Erdorf & Nicolas Heinrichs, 2011. "Co-movement of revenue: structural changes in the business cycle," Financial Markets and Portfolio Management, Springer, vol. 25(4), pages 411-433, December.
  55. Asgharian, Hossein & Nossman, Marcus, 2011. "Risk contagion among international stock markets," Journal of International Money and Finance, Elsevier, vol. 30(1), pages 22-38, February.
  56. Kenneth L. Smith, 2002. "Government Bond Market Seasonality, Diversification, and Cointegration: International Evidence," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 25(2), pages 203-221.
  57. Baur, Dirk G. & Lucey, Brian M., 2009. "Flights and contagion--An empirical analysis of stock-bond correlations," Journal of Financial Stability, Elsevier, vol. 5(4), pages 339-352, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:ulb:ulbeco:2013/149092. 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: (Benoit Pauwels)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.