 Dynamic correlation analysis of US financial crisis and contagion: evidence from four OECD countriesHong-Ghi Min and Young-Soon Hwang Applied Financial Economics, 2012, vol. 22, issue 24, 2063-2074 Abstract: By analysing the Dynamic Conditional Correlations (DCC) of the daily stock returns of four OECD countries with that of the US for the period 2006--2010, we could find a process of increasing correlations (contagion) in the first phase of the US financial crisis and an additional increase of correlations (herding) during the second phase of the US financial crisis for the UK, Australia and Switzerland. However, the impact of the US financial crisis on Japan was limited to the increase in correlation volatilities in the first phase. We also propose a new approach (DCC Multivariate Generalized Autoregressive Conditional Heteroscedastic model with Exogenous variables (DCCX-MGARCH)) that allows simultaneous estimation of the DCC and their determinants, which can be used to identify channels of contagion. It is shown that an increase in VIX stock market index increases conditional correlations but an increase in the TED spread and relative stock market capitalization decrease conditional correlations of stock returns between four OECD countries and the US. Date: 2012 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:apfiec:v:22:y:2012:i:24:p:2063-2074 Ordering information: This journal article can be ordered from DOI: 10.1080/09603107.2012.698161 Access Statistics for this article Applied Financial Economics is currently edited by Anita Phillips More articles in Applied Financial Economics from Taylor & Francis Journals |
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