How Do Crises Spread? Evidence from Accessible and Inaccessible Stock Indices

58 Pages Posted: 30 Oct 2002

See all articles by Brian H. Boyer

Brian H. Boyer

Brigham Young University - J. Willard and Alice S. Marriott School of Management

Kathy Yuan

London School of Economics & Political Science (LSE) - Department of Finance

Tomomi Kumagai

Wayne State University - Department of Economics

Date Written: January 2005

Abstract

We provide empirical evidence that stock market crises are spread globally through asset holdings of international investors. By separating emerging market stocks into two categories, those eligible for purchase by foreigners (accessible) and those that are not (inaccessible), we estimate and compare the degree to which accessible and inaccessible stock index returns co-move with the crisis country index returns. Our results show greater co-movement during high volatility periods, especially for accessible stock index returns, suggesting that crisis spread through the asset holdings of international investors rather than through changes in fundamentals.

Note: Previously titled "Are Investors Responsible for Stock Market Contagion?"

Keywords: crises, contagion, limits to arbitrage

Suggested Citation

Boyer, Brian H. and Yuan, Kathy Zhichao and Kumagai, Tomomi, How Do Crises Spread? Evidence from Accessible and Inaccessible Stock Indices (January 2005). AFA 2003 Washington, DC Meetings. Available at SSRN: https://ssrn.com/abstract=341940 or http://dx.doi.org/10.2139/ssrn.341940

Brian H. Boyer (Contact Author)

Brigham Young University - J. Willard and Alice S. Marriott School of Management ( email )

Provo, UT 84602
United States

Kathy Zhichao Yuan

London School of Economics & Political Science (LSE) - Department of Finance ( email )

Old Building
Houghton Street
London, London WC2A 2AE
United Kingdom
+44 (0)20 7955 6407 (Phone)
+44 (0)20 7849 4647 (Fax)

HOME PAGE: http://fmg.lse.ac.uk/~kathy

Tomomi Kumagai

Wayne State University - Department of Economics ( email )

656 W. Kirby
2097 Faculty Admin Building
Detroit, MI 48202
United States
313-577-3355 (Phone)
313-577-0149 (Fax)

HOME PAGE: http://141.217.130.11/~tkumagai/

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