CONDITIONAL CORRELATION COEFFICIENT AS A TOOL FOR ANALYSIS OF CONTAGION IN FINANCIAL MARKETS AND REAL ECONOMY INDEXES BASED ON THE SYNTHETIC RATIO

Rafał Siedlecki and Daniel Papla ()
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Rafał Siedlecki: Department of Corporate Finance and Value Management Wroclaw University of Economics, Poland
Daniel Papla: Department of Financial Investments and Risk Management Wroclaw University of Economics, Poland

ECONOMIC COMPUTATION AND ECONOMIC CYBERNETICS STUDIES AND RESEARCH, 2016, vol. 50, issue 4, 287-299

Abstract: We define contagion in financial markets as a significant increase in cross-market linkages after a shock to one or group of countries. Contagion occurs if cross-market co-movement increases significantly after the shock. The main goal of this paper is to analyze changes in dependence between a chosen world stock market and the constructed synthetic index. Subsequently the research hypothesis will be verified: dependence between the synthetic stock market index and other stock markets is increasing in periods of a rapid decrease in value of stock market indexes. Positive verification of this hypothesis means that there is a contagion in financial markets.

Keywords: contagion in financial markets; synthetic measurement; conditional measure of concordance. (search for similar items in EconPapers)
JEL-codes: C43 C58 G10 (search for similar items in EconPapers)
Date: 2016
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