Financial contagion and the TIR-MIDAS model

Wuyi Ye, Kunliang Jiang and Xiaoquan Liu

Finance Research Letters, 2021, vol. 39, issue C

Abstract: In this paper, we develop a new approach for modeling financial contagion. It is combines the tail index regression, which specifically describes fat tails in asset returns, with the information contained in macroeconomic variables via the mixed data sampling technique in order to identify contagion in international equity markets. Empirically, our model successfully detects structural breaks in the tails of equity return distributions between the US and five developed economies during the recent Great Recession, and identifies the existence of contagion for two of them. The findings underscore our method as a flexible and reliable alternative for examining contagion.

Keywords: Hill Estimator; Time Series Analysis; Financial Crisis; Macroeconomic Variables (search for similar items in EconPapers)
JEL-codes: C58 G15 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:39:y:2021:i:c:s154461232030132x

DOI: 10.1016/j.frl.2020.101589

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