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Financial Autarchy as Contagion Prevention: The Case of Colombian Pension Funds

Regulations restricting investment by pension funds in high risk and foreign assets may quarantine member accounts from contagious transmissions during financial crises. This paper analyses contagion from US equity markets to emerging market autarchic assets (Colombian private pension funds) during the recent financial crises. We test for contagion as changes in systematic risk between financial asset returns using an M-GARCH framework, where the S&P500 is the source of contagion to the autarchic asset. We find no evidence of contagion during the 2007-2009 crises, indicating protection to plan members from regulated portfolio restrictions during this period, but contagion from US stocks and fixed interest factors is significant during the recent sovereign debt crisis.

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Paper provided by Quantitative Finance Research Centre, University of Technology, Sydney in its series Research Paper Series with number 323.

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Length: 28 pages
Date of creation: 01 Jan 2013
Date of revision:
Handle: RePEc:uts:rpaper:323
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