Speculative bubbles and contagion: analysis of volatility's clusters during the DotCom bubble based on the dynamic conditional correlation model

Maximilian-Benedikt Herwarth Detlef Kohn and Pedro Valls Pereira

No 418, Textos para discussão from FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil)

Abstract: Reviewing the de nition and measurement of speculative bubbles in context of contagion, this paper analyses the DotCom bubble in American and European equity markets using the dynamic conditional correlation (DCC) model proposed by (Engle and Sheppard 2001) as on one hand as an econometrics explanation and on the other hand the behavioral nance as an psychological explanation. Contagion is de ned in this context as the statistical break in the computed DCCs as measured by the shifts in their means and medians. Even it is astonishing, that the contagion is lower during price bubbles, the main nding indicates the presence of contagion in the di¤erent indices among those two continents and proves the presence of structural changes during nancial crisis

Date: 2016-05-16
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Journal Article: Speculative bubbles and contagion: Analysis of volatility’s clusters during the DotCom bubble based on the dynamic conditional correlation model (2017)
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