Are Vietnam and Chinese stock markets out of the US contagion effect in extreme events?
Muhammad Bhatti () and
Darren Henry ()
Physica A: Statistical Mechanics and its Applications, 2017, vol. 480, issue C, 10-21
This paper employs Chi-plots, Kendall (K)-plots and three different copula functions to empirically examine the tail dependence between the US stock market and stock markets in Vietnam and China in order to test contagion effects pre- and post- the US subprime mortgage crisis. The results based on data between 2003 and 2011 indicate the presence of left tail dependence before and after the crisis suggesting no change in dependence structure, but there exists stronger left tail dependence between the US and Vietnam stock markets. It is observed that the US and Vietnam stock markets are more prone to crashing than booming together. For the Chinese market, the US and Shanghai stock markets exhibit left tail dependence before the crisis, but no evidence of post-crisis tail dependency. On the contrary, the Shenzhen stock market is independent of the US market before and after the crisis which implies that an extreme event in the US market is less likely to influence the Shenzhen stock market. This suggests that there is significant potential for risk diversification by investing in the Shenzhen market by US investors after the financial crisis. These results have not been documented in the existing literature and provide a new insight into risk diversification between the two important Asian emerging stock markets.
Keywords: Comovement; Contagion; Crises; Chi-plots; K-plots; Copulas (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only. Journal offers the option of making the article available online on Science direct for a fee of $3,000
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:480:y:2017:i:c:p:10-21
Access Statistics for this article
Physica A: Statistical Mechanics and its Applications is currently edited by K. A. Dawson, J. O. Indekeu, H.E. Stanley and C. Tsallis
More articles in Physica A: Statistical Mechanics and its Applications from Elsevier
Bibliographic data for series maintained by Haili He ().