Estimating Contagion Mechanism in Global Equity Market with Time-Zone Effect

Boyao Wu, Difang Huang and Muzi Chen

Papers from arXiv.org

Abstract: This paper proposes a time-zone vector autoregression (VAR) model to investigate comovements in the global financial market. Analyzing daily data from 36 national equity markets, we explore the subprime and European debt crises using static analysis and the COVID-19 crisis through a rolling window method. Our study of comovements using VAR coefficients reveals a resonance effect in the global system. Findings on densities and assortativities suggest the existence of the transmission mechanism in all periods and abnormal structural changes during the crises. Strength analysis uncovers the information transmission mechanism across continents over normal and turmoil periods and emphasizes specific stock markets' unique roles. We examine dynamic continent strengths to demonstrate the contagion mechanism in the global equity market over an extended period. Incorporating the time-zone effect significantly enhances the VAR model's interpretability. Signed networks provide more information on global equity markets and better identifies critical contagion patterns than unsigned networks.

Date: 2024-04
New Economics Papers: this item is included in nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Financial Management, 2023, 52: 543-572

Downloads: (external link)
http://arxiv.org/pdf/2404.04335 Latest version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:2404.04335

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().