Financial market stability--A test

Dirk Baur () and Niels Schulze

Journal of International Financial Markets, Institutions and Money, 2009, vol. 19, issue 3, 506-519

Abstract: This paper proposes a definition for financial market stability and an econometric test. It analyzes the impact of systematic and systemic shocks on developed and emerging market stock indices in normal and extreme market conditions. Financial market stability is defined as a constant impact of systematic shocks in normal and extreme market situations. Empirical results show that the impact of systematic shocks is significantly larger in extreme market conditions than in normal conditions for emerging markets. In contrast, the relationship is stable for developed markets. Hence, only developed markets meet an essential condition for financial market stability.

Keywords: Financial; stability; Systematic; risk; Contagion; Quantile; regression (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (13)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:19:y:2009:i:3:p:506-519

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