Financial Crises and Stock Market Contagion in a Multivariate Time-Varying Asymmetric Framework

Posted: 17 Oct 2010 Last revised: 9 Feb 2011

See all articles by Dimitris Kenourgios

Dimitris Kenourgios

National and Kapodistrian University of Athens - Department of Economics

Aristeidis Samitas

University of the Aegean

Nikos Paltalidis

Durham University Business School

Date Written: October 8, 2010

Abstract

This paper investigates financial contagion in a multivariate time-varying asymmetric framework, focusing on four emerging equity markets, namely Brazil, Russia, India, China (BRIC) and two developed markets (U.S. and U.K.), during five recent financial crises. Specifically, both a multivariate regime-switching Gaussian copula model and the asymmetric generalized dynamic conditional correlation (AG-DCC) approach are used to capture non-linear correlation dynamics during the period 1995-2006. The empirical evidence confirms a contagion effect from the crisis country to all others, for each of the examined financial crises. The results also suggest that emerging BRIC markets are more prone to financial contagion, while the industry-specific turmoil has a larger impact than country-specific crises. Our findings imply that policy responses to a crisis are unlikely to prevent the spread among countries, making fewer domestic risks internationally diversifiable when it is most desirable.

Keywords: Financial Crises, Contagion, Multivariate Regime-Switching Copula, AG-DCC Model

JEL Classification: F30, G15

Suggested Citation

Kenourgios, Dimitris and Samitas, Aristeidis and Paltalidis, Nikos, Financial Crises and Stock Market Contagion in a Multivariate Time-Varying Asymmetric Framework (October 8, 2010). Journal of International Financial Markets, Institutions and Money, Vol. 21, No.1, pp. 92-106, February 2011. Available at SSRN: https://ssrn.com/abstract=1689526

Dimitris Kenourgios (Contact Author)

National and Kapodistrian University of Athens - Department of Economics ( email )

1, Sofokleous Str
Office 521
Athens, 10559
Greece
+30 210 3689449 (Phone)

Aristeidis Samitas

University of the Aegean ( email )

8 Michalon str.
Chios
Greece

Nikos Paltalidis

Durham University Business School ( email )

Mill Hill Lane
Durham, Durham DH1 3LB
United Kingdom

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