Contagion and Dynamic Correlation of the Main European Stock Index Futures Markets: A Time-frequency Approach

Claudiu Albulescu (), Daniel Goyeau and Aviral Tiwari
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Daniel Goyeau: CRIEF [Poitiers] - Centre de recherche sur l'intégration économique et financière - UP - Université de Poitiers = University of Poitiers, Axe 2 (2011-2016) : « Marchés, Cultures de consommation, Autonomie et Migrations » (MSHS Poitiers) - MSHS de Poitiers - Maison des sciences de l'homme et de la société de Poitiers - UP - Université de Poitiers = University of Poitiers - CNRS - Centre National de la Recherche Scientifique, CPER INSECT - CPER "INnovation Sociale, Economique et Culturelle dans des Territoires en mutation" (MSHS Poitiers) - MSHS de Poitiers - Maison des sciences de l'homme et de la société de Poitiers [UAR 3565] - UP - Université de Poitiers = University of Poitiers - CNRS - Centre National de la Recherche Scientifique

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Abstract: In this paper, we examine the financial contagion and dynamic correlation between three European stock index futures, namely FTSE 100, DAX 30 and CAC 40. For this purpose we resort to a continuous wavelet transform framework and we cover the aftermath of the sovereign debt crisis period. More precisely, we analyze the power spectrum of the series, the wavelet coherency and the average dynamic correlation before and after turbulence episodes occurred after the outburst of the sovereign debt crisis. Our results show that the stock index futures are highly correlated and this correlation increases around financial distress episodes. The contagion phenomenon, associated with a high-frequency correlation, manifested especially after the additional rescue package awarded to Greece. All in all, the dynamic correlation is influenced by the frequency decomposition level and fluctuates considerably in the very long-run.

Keywords: European financial markets integration; Stock index futures; Contagion; Wavelets; Portfolio diversification (search for similar items in EconPapers)
Date: 2015
Note: View the original document on HAL open archive server: https://hal.science/hal-01376756
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Citations: View citations in EconPapers (10)

Published in Procedia Economics and Finance, 2015, Globalization and Higher Education in Economics and Business Administration - GEBA 2013, 20, pp.19 - 27. ⟨10.1016/S2212-5671(15)00042-8⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01376756

DOI: 10.1016/S2212-5671(15)00042-8

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