The Global Crisis and Equity Market Contagion
Geert Bekaert (),
Michael Ehrmann (),
Marcel Fratzscher () and
Arnaud Mehl ()
Journal of Finance, 2014, vol. 69, issue 6, 2597-2649
type="main"> We analyze the transmission of the 2007 to 2009 financial crisis to 415 country-industry equity portfolios. We use a factor model to predict crisis returns, defining unexplained increases in factor loadings and residual correlations as indicative of contagion. While we find evidence of contagion from the United States and the global financial sector, the effects are small. By contrast, there has been substantial contagion from domestic markets to individual domestic portfolios, with its severity inversely related to the quality of countries’ economic fundamentals. This confirms the “wake-up call” hypothesis, with markets focusing more on country-specific characteristics during the crisis.
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Working Paper: The Global Crisis and Equity Market Contagion (2014)
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