Contagion Testing in Embryonic Markets Under Alternative Stressful US Market Scenarios

16 Pages Posted: 23 Jan 2020

See all articles by Scott M. R. Mahadeo

Scott M. R. Mahadeo

Portsmouth Business School

Reinhold Heinlein

Keele University - Keele Management School

Gabriella Deborah Legrenzi

Keele University - Keele Business School

Date Written: 2019

Abstract

We consolidate alternative ways for identifying stable and stressful scenarios in the S&P 500 market to construct contagion tests for recipient markets vulnerable to disturbances from this source market. The S&P 500 is decomposed into discrete conditions of: (1) Tranquil versus turbulent volatility; (2) Bull versus bear market phases; (3) Normal periods versus asset bubbles and crises. We analyse the relationship between the S&P 500 and major emerging Caribbean stock markets and find that, despite the prominent trade related exposure to the US, financial linkages are much less pronounced than might be expected outside of the Great Recession.

Keywords: Caribbean, contagion, correlation, S&P 500, stock market, United States

JEL Classification: C580, G010

Suggested Citation

R. Mahadeo, Scott M. and Heinlein, Reinhold and Legrenzi, Gabriella Deborah, Contagion Testing in Embryonic Markets Under Alternative Stressful US Market Scenarios (2019). CESifo Working Paper No. 8029. Available at SSRN: https://ssrn.com/abstract=3523533

Scott M. R. Mahadeo (Contact Author)

Portsmouth Business School ( email )

Portsmouth, PO1 3DE
United Kingdom

Reinhold Heinlein

Keele University - Keele Management School ( email )

Darwin Building
Staffordshire, ST5 5BG
United Kingdom

Gabriella Deborah Legrenzi

Keele University - Keele Business School ( email )

Keele, ST5 5AA
United Kingdom

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