Spatial contagion between financial markets: new evidence of asymmetric measures

Wafa Miled, Zied Ftiti () and Jean-Michel Sahut ()
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Wafa Miled: University of Tunis
Jean-Michel Sahut: IDRAC Business School

Annals of Operations Research, 2022, vol. 313, issue 2, No 25, 1183-1220

Abstract: Abstract The objective of this paper is to identify the presence, direction and time at which the pure contagion effect occurred between financial markets. In so doing, the aim is to prove the existence of both spatial and temporal asymmetries of pure contagion effects. Firstly, a new empirical framework is proposed in order to define a spatial contagion index using the conditional cumulative distribution function as a parameter to estimate a conditional copula. This methodology enables us to estimate a dynamic conditional copula, providing information about how the market sent pure contagion effects and when. Secondly, in addition to detecting the direction of contagion, the real-time contagion effect is determined, enabling us to calculate the delay of contagion effects (spillover) between financial markets. The present empirical results show the existence of both spatial and temporal asymmetry for bilateral contagion effects for 16 mature and emerging stock markets during the 2001–2018 period. This proves the importance of taking temporal asymmetry into account when we want to detect the contagion effect of every crisis and to estimate the period of pure contagion relating to investors’ behaviors. Finally, these findings highlight the fact that contagion effects were more intensive during the subprime crisis than they were during the European debt crisis.

Keywords: Spatial contagion; Copula; Financial time series; Asymmetric dependence (search for similar items in EconPapers)
JEL-codes: C31 C32 E44 G15 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10479-021-04223-9

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