Market linkages, variance spillovers, and correlation stability: Empirical evidence of financial contagion
Monica Billio and
Massimiliano Caporin
Computational Statistics & Data Analysis, 2010, vol. 54, issue 11, 2443-2458
Abstract:
To model the contemporaneous relationships among Asian and American stock markets, a simultaneous equation system with GARCH errors is introduced. In the estimated residuals, the correlation matrix is analyzed over rolling windows and using a correlation matrix distance, which allows a graphical analysis and the development of a statistical test of correlation movements. Furthermore, a methodology that can be used to identify turmoil periods on a data-driven basis is presented. The previous results are applied in the analysis of the contagion issue between Asian and American stock markets. The results show some evidence of contagion, and the proposed statistics identify, on a data-driven basis, turmoil periods consistent with the ones currently assumed in the literature.
Date: 2010
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Working Paper: Market linkages, variance spillovers and correlation stability: empirical evidences of financial contagion (2007) ![Downloads](/downloads_econpapers.gif)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:csdana:v:54:y:2010:i:11:p:2443-2458
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