Integration and risk contagion in financial crises: Evidence from international stock markets

Konstantinos Gkillas, Athanasios Tsagkanos and Dimitrios I. Vortelinos

Journal of Business Research, 2019, vol. 104, issue C, 350-365

Abstract: We examine the size of contagion (i.e., integration and co-movement) of weighted portfolios on a global level determining whether the amplification of transmission channels among either emerging or developed financial markets can be affected by different values of a country's characteristics (macro-economic variables) on a regional and global level. To this end, we investigate a large sample of 4577 trading days from sixty-eight international equity markets, taking into consideration both the regional and global setting. The dataset begins on January 3, 2000 and ends on August 31, 2017. The employed methodology concerns a regime-switching generalized autoregressive conditional heteroskedasticity model in accordance with a worldwide regional-local capital asset pricing model. Moreover, two different contagion tests are utilized to examine whether international equity portfolios experienced contagion effects through increased co-movements during periods of financial crises. Our key findings point to distinct shifts in co-movement that are detected either on the regional or global level. The robustness analysis provides more evidence of the contagion effect at the regional level from the US crisis.

Keywords: Contagion; Crises; Regime switching; Stylized portfolios (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (31)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:104:y:2019:i:c:p:350-365

DOI: 10.1016/j.jbusres.2019.07.031

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