Contagion or Interdependence in the recent Global Financial Crisis? An application to the stock markets using unconditional cross-market correlations
We consider stock market contagion as a significant increase in cross-market linkages after a shock to one country or group of countries. Under this definition we study if contagion occurred from the U.S. Financial Crisis to the rest of the major stock markets in the world by using the adjusted (unconditional) correlation coefficient approach (Forbes and Rigobon, 2002) which consists of testing if average crossmarket correlations increase significantly during the relevant period of turmoil. We would not reject the null hypothesis of interdependence in favour of contagion if the increase in correlation only suggests a continuation of high linkages in all state of the world. Moreover, if contagion occurs, this would justify the intervention of the IMF and the suddenly portfolio restructuring during the period under study.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: 977 75 98 00
Fax: 977 75 98 10
Web page: http://www.urv.cat
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.:
- Mardi Dungey & Renee Fry & Brenda Gonzalez-Hermosillo & Vance Martin, 2005.
"Empirical modelling of contagion: a review of methodologies,"
Taylor & Francis Journals, vol. 5(1), pages 9-24.
- Martin, V. & Dungey & M., 2004. "Empirical Modelling of Contagion: A Review of Methodologies," Econometric Society 2004 Far Eastern Meetings 574, Econometric Society.
- 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 & Vance Martin & Brenda GonzÃ¡lez-Hermosillo, 2004. "Empirical Modeling of Contagion: A Review of Methodologies," IMF Working Papers 04/78, International Monetary Fund.
- Mardi Dungey & Diana Zhumabekova, 2001. "Testing for contagion using correlations: some words of caution," Pacific Basin Working Paper Series 2001-09, Federal Reserve Bank of San Francisco.
- Roberto Rigobon, 2002.
"Contagion: How to Measure It?,"
in: Preventing Currency Crises in Emerging Markets, pages 269-334
National Bureau of Economic Research, Inc.
- Ray Yeu-Tien Chou & Victor Ng & Lynn K. Pi, 1994. "Cointegration of International Stock Market Indices," IMF Working Papers 94/94, International Monetary Fund.
- 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.
- Taimur Baig & Ilan Goldfajn, 1998.
"Financial Market Contagion in the Asian Crisis,"
IMF Working Papers
98/155, International Monetary Fund.
- M. Hashem Pesaran & Andreas Pick, 2004.
"Econometric Issues in the Analysis of Contagion,"
CESifo Working Paper Series
1176, CESifo Group Munich.
- Hashem Pesaran & Andreas Pick, 2004. "Econometric Issues in the Analysis of Contagion," Money Macro and Finance (MMF) Research Group Conference 2004 67, Money Macro and Finance Research Group.
- Pesaran, M.H. & Pick, A., 2004. "Econometric Issues in the Analysis of Contagion," Cambridge Working Papers in Economics 0402, Faculty of Economics, University of Cambridge.
- Giancarlo Corsetti & Marcello Pericoli & Massimo Sbracia, 2001.
"Correlation Analysis of Financial Contagion: What One Should Know Before Running a Test,"
822, Economic Growth Center, Yale University.
- Giancarlo Corsetti & Marcello Pericoli & Massimo Sbracia, 2001. "Correlation Analysis of Financial Contagion: What One Should Know before Running a Test," Temi di discussione (Economic working papers) 408, Bank of Italy, Economic Research and International Relations Area.
- Reinhart, Carmen & Kaminsky, Graciela, 1998.
"Financial crises in Asia and Latin America: Then and now,"
13877, University Library of Munich, Germany.
- Kaminsky, Graciela L & Reinhart, Carmen M, 1998. "Financial Crises in Asia and Latin America: Then and Now," American Economic Review, American Economic Association, vol. 88(2), pages 444-48, May.
- Hamao, Yasushi & Masulis, Ronald W & Ng, Victor, 1990. "Correlations in Price Changes and Volatility across International Stock Markets," Review of Financial Studies, Society for Financial Studies, vol. 3(2), pages 281-307.
- Mervyn A. King & Sushil Wadhwani, 1989.
"Transmission of Volatility Between Stock Markets,"
NBER Working Papers
2910, National Bureau of Economic Research, Inc.
- Ehud I. Ronn & Akin Sayrak & Stathis Tompaidis, 2009. "The Impact of Large Changes in Asset Prices on Intra-Market Correlations in the Domestic and International Markets," The Financial Review, Eastern Finance Association, vol. 44(3), pages 405-436, 08.
When requesting a correction, please mention this item's handle: RePEc:urv:wpaper:2072/211884. 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: (Ariadna Casals)
If references are entirely missing, you can add them using this form.