Evidence of cross-asset contagion in U.S. markets

Guang-Di Chang and Po-Ching Cheng

Economic Modelling, 2016, vol. 58, issue C, 219-226

Abstract: This study examines evidence of cross-asset contagion among REIT, money, stock, bond, and currency markets in the US from 2006 to 2012, which covers the subprime and European sovereign debt crisis. We apply the Granger causality test and a vector auto-regression to examine the change of causality structure. Our results show that contagion exists from medium-term bond markets to equity markets; REIT, money markets and short-term bond markets show little evidence of cross-asset contagion with other markets; and the currency market shows high co-movement and contagion with equity markets. Our findings provide more rewarding asset reallocating strategies for the investors who invest in both bond and equity markets before a crisis to consider reallocating their portfolio into REIT and money markets to benefit from diversification during a crisis period.

Keywords: Contagion; REIT; Granger causality test; Diversification; Subprime crisis; European sovereign debt crisis (search for similar items in EconPapers)
JEL-codes: C58 G01 G11 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:58:y:2016:i:c:p:219-226

DOI: 10.1016/j.econmod.2016.05.014

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