EconPapers    
Economics at your fingertips  
 

International stock market contagion: A CEEMDAN wavelet analysis

Zhongbao Zhou, Ling Lin and Shuxian Li

Economic Modelling, 2018, vol. 72, issue C, 333-352

Abstract: This paper investigates the contagion effect among stock markets (Asia, European and America) under time varying frequencies by use of a CEEMDAN wavelet (complete ensemble empirical mode decomposition with adaptive noise) model. Firstly, we decompose stock index return into different independent intrinsic mode functions and wavelet decomposition functions. Secondly, we reconstruct the independent IMFs and wavelet decomposition functions into three components: a high-frequency component (effects of irregular events), a low-frequency component (effects of extreme events) and the long-term trend. Thirdly, we assess the accumulated impulse response and analyze the stock markets contagion under time- varying frequencies. Results show that shocks caused by irregular events and extreme events can be transmitted between different stock markets. Moreover, shocks caused by irregular events can pose sudden and short-term risk contagion to stock returns. And shocks caused by extreme events can pose positive and sustained risk contagion to stock returns. Also, we compare our results with those from the discrete wavelet transform model and findings in the literature.

Keywords: International stock market contagion; Accumulated response; CEEMDAN model; Discrete wavelet transform model; Fine to coarse algorithm (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999317306545
Full text for ScienceDirect subscribers only

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:eee:ecmode:v:72:y:2018:i:c:p:333-352

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2018-06-23
Handle: RePEc:eee:ecmode:v:72:y:2018:i:c:p:333-352