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Dynamic Conditional Correlation Analysis of Stock Market Contagion: Evidence from the 2007-2010 Financial Crises

Zouheir Ahmed Mighri () and Faysal Mansouri
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Faysal Mansouri: Department of Economics and Quantitative Methods.Institut des Hautes Etudes Commerciales de Sousse, University of Sousse, Tunisia

International Journal of Economics and Financial Issues, 2013, vol. 3, issue 3, 637-661

Abstract: This research examines the time-varying conditional correlations to the daily stock index returns. We use a dynamic conditional correlation (DCC) multivariate GARCH model in order to capture potential contagion effects between US and major developed and emerging stock markets during the 2007-2010 major financial crisis. Empirical results show substantial evidence of significant increase in conditional correlation or contagion as well as herding behavior during crisis periods. This result contrasts with the “no contagion” finding reached by Forbes and Rigobon (2002).

Keywords: Dynamic correlation; DCC-GARCH; contagion; financial crisis; stock markets. (search for similar items in EconPapers)
JEL-codes: C58 (search for similar items in EconPapers)
Date: 2013
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