CONTAGION AND PORTFOLIO SHIFT IN EMERGING COUNTRIES´ SOVEREIGN BONDS

Alicia Garcia Herrero and Antonio Diez de los Rios

International Finance from University Library of Munich, Germany

Abstract: The paper tests whether there were events of contagion, and portfolio shift, in the sovereign bond markets of eleven emerging countries' between January 1995 and November 2001. From existing definitions, we narrow down the concept of contagion by focusing on pricing errors, after general market movements have been taken into account with a three-factor asset pricing model. We measure contagion (and portfolio shift) in terms of a causal positive (negative) dynamic co-movement between sovereign bond pricing errors. Downgrades of sovereign ratings are used as proxies for a shock. We find empirical support for contagion and portfolio shift for a number of countries on the basis of our definition.

Keywords: Financial linkages; financial crisis; Granger causality; international (search for similar items in EconPapers)
JEL-codes: F30 F33 G12 G15 (search for similar items in EconPapers)
Date: 2004-03-02
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Related works:
Working Paper: Contagion and portfolio shift in emerging countries' sovereign bonds (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpif:0403002

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