Joint tests of contagion with applications to financial crises

Renee Fry-McKibbin, Cody Yu-Ling Hsiao and Vance Martin

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: Joint tests of contagion are derived which are designed to have power where contagion operates simultaneously through coskewness, cokurtosis and covolatility. Finite sample properties of the new tests are evaluated and compared with existing tests of contagion that focus on a single channel. Applying the tests to daily Eurozone equity returns from 2005 to 2014 shows that contagion operates through higher order moment channels during the GFC and the European debt crisis, which are not necessarily detected by traditional tests based on correlations.

Keywords: Coskewness; Cokurtosis; Covolatility; Lagrange multiplier tests; European financial crisis; equity markets. (search for similar items in EconPapers)
JEL-codes: C1 F3 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2017-10
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (4)

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Working Paper: Joint tests of contagion with applications to financial crises (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2017-65

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