Bad bad contagion

Juan M. Londono

Journal of Banking & Finance, 2019, vol. 108, issue C

Abstract: This paper proposes a new measure of contagion as the coincidence of large left-tail events in the idiosyncratic disturbances of international stock returns after controlling for their exposure to a global factor. Episodes of bad contagion, especially those involving a large number of countries, are followed by a significant drop in international stock returns. This predictability pattern can be understood as an international transmission effect, as bad contagion only affects countries that did not experience tail events. In addition, the negative effect of bad contagion spills over to real growth, sovereign default risk, and financial stability indicators.

Keywords: International stock markets; Interconnectedness; Integration; Transmission; Spillovers (search for similar items in EconPapers)
JEL-codes: F36 F65 G15 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426619302274
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Bad Bad Contagion (2016)
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:jbfina:v:108:y:2019:i:c:s0378426619302274

DOI: 10.1016/j.jbankfin.2019.105652

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().