Financial Contagion: A Local Correlation Analysis

Research in International Business and Finance, Vol. 25, No. 1 pp. 11-25, 2011

Posted: 4 Mar 2011

See all articles by A. Can Inci

A. Can Inci

Bryant University

Hsi-Cheng Li

Bryant University

Joseph McCarthy

Bryant University

Date Written: March 2, 2011

Abstract

Local correlation is used to examine financial contagion. We share the view of previous research that there is contagion from the U.S. spot equity market to that of Germany and Britain. In addition, we provide evidence to suggest contagion from the U.S. spot equity market to that of Japan and Hong Kong. Furthermore, we have detected contagion from U.S. futures to other futures markets. However, there is no reverse contagion from any of the German, British, Japanese, and Hong Kong spot or index futures markets to those of the U.S. The results have international diversification, portfolio management, and within-industry implications.

Keywords: Financial Contagion, Local Correlation, Index Futures

JEL Classification: G01, G13, G15

Suggested Citation

Inci, Ahmet Can and Li, Hsi-Cheng and McCarthy, Joseph, Financial Contagion: A Local Correlation Analysis (March 2, 2011). Research in International Business and Finance, Vol. 25, No. 1 pp. 11-25, 2011. Available at SSRN: https://ssrn.com/abstract=1775247

Ahmet Can Inci (Contact Author)

Bryant University ( email )

1150 Douglas Pike
Smithfield, RI 02917
United States

Hsi-Cheng Li

Bryant University ( email )

1150 Douglas Pike
Smithfield, RI 02917-1284
United States

Joseph McCarthy

Bryant University ( email )

1150 Douglas Pike
Smithfield, RI 02917-1284
United States
401-232-6446 (Phone)

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