Market linkage and information spillover: Evidence from pre-crisis, crisis, and recovery periods

Liang Ding and Xiaoling Pu

Journal of Economics and Business, 2012, vol. 64, issue 2, 145-159

Abstract: We examine market linkage and information spillover across the U.S. stock, corporate bond, and credit derivatives markets in the pre-crisis, crisis, and recovery periods. Our results suggest that information spills over across markets in a timely manner. We find that the market linkage becomes stronger in the crisis period, which could be explained by the increasing volatility and deteriorating funding liquidity. In particular, volatility plays a dominant role in the information transmission, which absorbs the liquidity effect when both volatility and liquidity are included as exogenous factors in a vector autoregressive model.

Keywords: Market linkage; Information spillover; Volatility; Liquidity (search for similar items in EconPapers)
JEL-codes: G01 G14 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jebusi:v:64:y:2012:i:2:p:145-159

DOI: 10.1016/j.jeconbus.2011.11.001

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