What Drives Contagion in Financial Markets? Liquidity Effects Versus Information Spill‐Over

26 Pages Posted: 18 Jun 2014

See all articles by Lars Helge Hass

Lars Helge Hass

Lancaster University - Management School; University of Iowa - Henry B. Tippie College of Business

Christian Koziol

University of Mannheim - Department of Business Administration and Finance

Denis Schweizer

Concordia University

Date Written: June 2014

Abstract

The objective of this paper is to study how contagion works in financial markets by identifying the mechanisms which drive the spill‐over of shocks from one market to other markets. To address this question we use open‐ended property funds (OPFs) as they offer a unique institutional setting which allows separating between liquidity and information spill‐over. We find that that liquidity risk captures the observed discounts very well when the danger of potential future impairments is low. Once the impending NAV impairments become very likely, also this component matters and attributes for a fraction of the total discount.

Keywords: financial contagion, information spill‐over, open‐ended property funds

Suggested Citation

Hass, Lars Helge and Koziol, Christian and Schweizer, Denis, What Drives Contagion in Financial Markets? Liquidity Effects Versus Information Spill‐Over (June 2014). European Financial Management, Vol. 20, Issue 3, pp. 548-573, 2014. Available at SSRN: https://ssrn.com/abstract=2456035 or http://dx.doi.org/10.1111/j.1468-036X.2013.12011.x

Lars Helge Hass (Contact Author)

Lancaster University - Management School ( email )

Department of Accounting and Finance
Lancaster, LA1 4YX
United Kingdom

University of Iowa - Henry B. Tippie College of Business ( email )

Dept. of Accounting
Iowa City, IA 52242-1000
United States

Christian Koziol

University of Mannheim - Department of Business Administration and Finance ( email )

D-68131 Mannheim
Germany
(0621) 181-1519 (Fax)

Denis Schweizer

Concordia University ( email )

1455 de Maisonneuve Blvd. W.
Montreal, Quebec H3G 1M8
Canada
+1 (514) 848-2424 ext. 2926 (Phone)
+1 (514) 848-4500 (Fax)

HOME PAGE: http://www.concordia.ca/jmsb/faculty/denis-schweizer.html

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