Detecting Shift and Pure Contagion in East Asian Equity Markets: A Unified Approach

21 Pages Posted: 19 Jul 2010

See all articles by Thomas Flavin

Thomas Flavin

National University of Ireland, Maynooth (Maynooth University) - Department of Economics, Finance and Accounting

Ekaterini Panopoulou

Essex Business School

Abstract

We test for contagion between pairs of East Asian equity markets over the period 1990–2007. We develop an econometric methodology that allows us to test for both ‘shift’ and ‘pure’ contagion within a unified framework. Using both Hong Kong and Thailand as potential shock sources, we find strong evidence of both types of contagion. Therefore, during episodes of high volatility, equity returns are influenced by changes in the transmission of common shocks and additionally by the diffusion of idiosyncratic shocks through linkages that do not exist during normal times.

Suggested Citation

Flavin, Thomas J and Panopoulou, Ekaterini, Detecting Shift and Pure Contagion in East Asian Equity Markets: A Unified Approach. Pacific Economic Review, Vol. 15, No. 3, pp. 401-421, August 2010, Available at SSRN: https://ssrn.com/abstract=1643555 or http://dx.doi.org/10.1111/j.1468-0106.2010.00510.x

Thomas J Flavin

National University of Ireland, Maynooth (Maynooth University) - Department of Economics, Finance and Accounting ( email )

County Kildare
Ireland
+353 1 708 3369 (Phone)
+353 1 708 3934 (Fax)

Ekaterini Panopoulou (Contact Author)

Essex Business School ( email )

Wivenhoe Park
Colchester, CO4 3SQ
United Kingdom

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