Financial Contagion: A Tale of Three Bubbles

Nathan Burks, Adetokunbo Fadahunsi and Ann Marie Hibbert
Additional contact information
Nathan Burks: Department of Finance, West Virginia University, Morgantown, WV 26506, USA
Adetokunbo Fadahunsi: Department of Statistics, George Mason University, Fairfax, VA 22030, USA
Ann Marie Hibbert: Department of Finance, John Chambers College of Business and Economics, West Virginia University, Morgantown, WV 26505, USA

JRFM, 2021, vol. 14, issue 5, 1-14

Abstract: The primary purpose of the study is to identify and measure the properties of asset bubbles, volatility clustering, and financial contagion during three recent financial market anomalies that originated in the U.S. and Chinese markets. In particular, we focus on the 2000 DotCom Bubble, the 2008 Housing Crisis, and the 2015 Chinese Bubble. We employ three main empirical methods; the LPPL model to identify asset bubbles, the DCC-GARCH model to measure volatility clustering, and the Diebold-Yilmaz volatility spillover index to measure the level of financial contagion. We provide robust evidence that during the DotCom bubble there was very limited spillover between the S&P 500, the Shanghai, and the Shenzhen Composite Indexes. However, there was significantly more spillover effects in the two more recent crises, i.e., the Housing crisis and the 2015 Chinese Bubble. Together, these results highlight the fact that as financial markets have become more globalized, there are greater levels of volatility transmission and correspondingly fewer potential benefits from international diversification.

Keywords: financial contagion; volatility clustering; spillover effects; bubble (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.mdpi.com/1911-8074/14/5/229/pdf (application/pdf)
https://www.mdpi.com/1911-8074/14/5/229/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:14:y:2021:i:5:p:229-:d:558547

Access Statistics for this article

JRFM is currently edited by Ms. Chelthy Cheng

More articles in JRFM from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().