Contagion or Interdependence? Comparing Signed and Unsigned Spillovers

Abstract

Differentiating between `good' and `bad' spillovers we disentangle sources of potential crisis from the intricately complex web of connections across international equity markets. In particular, we analyze the behaviour of 30 global equity markets and compute multiple spillover measures, which encapsulate many large and small crises episodes. Instead of relying on ex–post-crisis information, our model identifies crises periods. Moreover, we are able to detect newly emerging contagion in the system.

Keywords: Systemic risk, signed spillover, contagion, interdependence

JEL Classification: C3,C32,C45,C53,D85,G10