Market Integration and Contagion

Geert Bekaert, Campbell Harvey () and Angela Ng
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Angela Ng: Hong Kong University of Science and Technology

The Journal of Business, 2005, vol. 78, issue 1, 39-70

Abstract: Contagion is usually defined as correlation between markets in excess of that implied by economic fundamentals; however, there is considerable disagreement regarding the definition of the fundamentals, how they might differ across countries, and the mechanisms that link them to asset returns. Our research starts with a two-factor model with time-varying betas that accommodates various degrees of market integration. We apply this model to stock returns in three different regions: Europe, Southeast Asia, and Latin America. In addition to examining contagion during crisis periods, we document time variation in world and regional market integration and measure the proportion of volatility driven by global, regional, and local factors.

Date: 2005
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Working Paper: Market Integration and Contagion (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:78:y:2005:i:1:p:39-70

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