Equity Market Comovement and Contagion: A Sectoral Perspective

40 Pages Posted: 2 Dec 2005

See all articles by Lichuan Xia

Lichuan Xia

City University London - Sir John Cass Business School

Kate Phylaktis

City University London - Sir John Cass Business School

Date Written: July 26, 2006

Abstract

The paper takes an asset pricing perspective to investigate the equity market comovement and contagion at the sector level during the period 1990-2004 across the regions of Europe, Asia and Latin America. It examines whether unexpected shocks from a particular market, or group of markets, are propagated to the sectors in other countries. The results confirm the sector heterogeneity of contagion. This implies that there are sectors which can still provide a channel for achieving the benefits of international diversification during crises despite the prevailing contagion at the market level. In addition, the results lend support to the importance of financial links in the propagation of contagion.

Keywords: Contagion, International Diversification, Industry Returns, Financial Integration, Global Linkages

JEL Classification: G11, G15, F3, F36, F15

Suggested Citation

Xia, Lichuan and Phylaktis, Kate, Equity Market Comovement and Contagion: A Sectoral Perspective (July 26, 2006). EFA 2006 Zurich Meetings Paper; Cass Business School Research Paper. Available at SSRN: https://ssrn.com/abstract=844207 or http://dx.doi.org/10.2139/ssrn.844207

Lichuan Xia

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Kate Phylaktis (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 20 70408735 (Phone)
+44 20 70408881 (Fax)

HOME PAGE: http://www.cass.city.ac.uk/faculty/k.phylaktis/

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