Globalization and Financial Market Contagion: Evidence from Financial Crisis and Natural Disasters
Published in: Financial Aspects of Recent Trends in the Global Economy. ASERS Publication. (April, 2013).
27 Pages Posted: 10 Sep 2014 Last revised: 1 Apr 2015
Date Written: September 8, 2013
With financial globalization, investors can gain from diversification if returns from financial markets are stable and not correlated. However with volatility spillovers, increase in cross-market correlations exist as a real-effect and are not taken into account for asset allocation and portfolio composition. This chapter assesses financial contagion from two recent trends in the world economy: the global financial crisis and the 2011 Japanese natural disasters (tsunami, earthquake and nuclear crises).
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