Measuring stock market contagion: Local or common currency returns?

Mark Mink

Emerging Markets Review, 2015, vol. 22, issue C, 18-24

Abstract: Empirical research on contagion between international stock markets generally focuses on index returns converted into US dollars. This paper argues that it would be more appropriate to use returns denominated in countries' local currencies, as only these returns accurately reflect price fluctuations in national stock markets. Returns converted into a common currency also reflect fluctuations in the exchange rate, which is shown to bias the outcomes of a contagion test.

Keywords: Contagion; Stock markets; Exchange rates; Global financial crisis (search for similar items in EconPapers)
JEL-codes: F3 G11 G15 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:22:y:2015:i:c:p:18-24

DOI: 10.1016/j.ememar.2014.11.003

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