The emerging market crisis and stock market linkages: further evidence

Yang, Jian; Hsiao, Chêng; Li, Qi; Wang, Zijun

doi:10.1002/jae.889

Cited by 75 publications

(37 citation statements)

References 33 publications

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“…The European sovereign debt crisis that followed was not entirely unexpected (Reinhart and Rogoff, 2009). In fact, the contagion effect of past crises, which is defined as the transmission mechanism that occurs during a financial crisis, continues to dominate the views of economists, academics and policy makers (Caporale et al, 2006 on the Asian financial crisis; Yang et al, 2006 on the Russian crisis; and Ravichandran and Maloain, 2010 on the recent financial crisis).…”

Section: Introductionmentioning

confidence: 99%

Investor induced contagion during the banking and European sovereign debt crisis of 2007–2012: Wealth effect or portfolio rebalancing?

Petmezas

Santamaría

2014

Journal of International Money and Finance

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This study investigates the way a crisis spreads within a country and across borders by testing the investor induced contagion hypothesis through the liquidity channel on stockbond relationships of the US and five European countries before and during the global banking and European sovereign debt crisis of 2007-2012. We provide evidence consistent with the wealth effect as a source of contagion for the majority of countries. Nevertheless, we uncover evidence of investor induced contagion sourced by the portfolio rebalancing effect for correlations involving Spanish and Italian bonds during the debt crisis. Further, we find that tight (narrow) credit spreads reduce (magnify) the wealth and portfolio rebalancing effects, which are offset by the opposite effects of risk aversion amongst investors, a dynamic that is not restricted to crisis periods.

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Section: Introductionmentioning

confidence: 99%

Investor induced contagion during the banking and European sovereign debt crisis of 2007–2012: Wealth effect or portfolio rebalancing?

Petmezas

Santamaría

2014

Journal of International Money and Finance

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“…As mentioned in Yang et al [23], the correlation of market returns of different stocks can be interpreted as an indicator of the comovement between these stocks. Thus, a higher positive correlation means a higher level of comovement between the stocks which implies that it is more difficult to diversify portfolio risk by investing in these different stocks.…”

Section: International Journal Of Trade Economics and Finance Vol mentioning

confidence: 99%

Return and Volatility Spillover between Financial Market Participants of Dhaka Stock Exchange Using Asymmetric GARCH Methods

Arefin¹,

Ahkam²

2017

IJTEF

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Abstract-This paper is an investigation of the comovement in the form of return and volatility spillover across financial market participants of Bangladesh. This study uses daily price data of commercial banks, non-bank financial institutions (NBFI), and insurance companies traded in the Dhaka Stock Exchange (DSE) for the period spanning 2009 to 2016. Bayesian Vector Autoregressive (VAR) model has been used in the conditional mean equations of EGARCH and GJR-GARCH models have been used to test the return spillover effects whereas lagged squared residuals and lagged conditional variances have been used as variance regressors in conditional variance equations to test the spillover effects of historical volatility and innovations transmitting in the form of shock to other participants operating in the same market. Bayesian VAR output reveals a highly significant bi-directional return spillover between bank-insurance pair and also between NBFIs-insurance pair. However, return spillover between commercial banks and NBFIs is unidirectional; only bank returns are affecting returns from NBFIs. Conditional volatility of NBFIs exhibit a highly significant asymmetric effect implying that bad news increases volatility of NBFIs to a greater degree than good news. Both GJR-GARCH and EGARCH output reveal bidirectional volatility spillover in the form of historical volatility and innovations among commercial banks, NBFIs and insurance companies.Index Terms-Bayesian VAR, E-GARCH, GJR-GARCH, return spillover, volatility spillover, DSE.

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“…While a significant body of papers has documented the nature of long-term relations in both Asian (Yang and Siregar 2001, Azman-Saini 2002, Manning (2002, Phylaktis and Ravazollo, 2005, Laopodis, 2005, Chang and Caudill, 2006and Choudhry, 2007 and European (Serletis and King 1997, Chan et al, 1997, Rangvid, 2001, Phengpis and Apilado, 2004, Voronkova, 2004, Yang et al, 2006, Syriopoulos, 2007and Aggarwal et al, 2009 African stock markets and use, in addition to a regime switching cointegration methodology, the nonparametric cointegration model of Breitung (2002) and the stochastic volatility cointegration model of Harris et al, (2002).…”

Section: Accepted Manuscriptmentioning

confidence: 99%

Robust global stock market interdependencies

Lucey

Muckley

2011

International Review of Financial Analysis

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In this paper, we examine the scope for international stock portfolio diversification, from the viewpoint of a United States representative investor, in regard to both the Asian and the European stock markets. Our findings indicate that despite correlation style evidence to the contrary, the European stock markets provide a superior long-term diversification opportunity relative to that provided by the Asian stock markets. Hence, a short-term measurement of interdependence appears to be uninformative with respect to the diversification opportunities of investors with longer term investment horizons. In terms of methodology, we adopt common stochastic trend tests, including a common stochastic trend test which accounts for generalised autoregressive conditional heteroskedasticity effects in conjunction with the recursive estimation of these tests to estimate the development of longterm stock market interdependence linkages. Recursively estimated robust correlations between the international stock markets are utilised to reveal the nature of short-term stock market interdependence linkages.

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The emerging market crisis and stock market linkages: further evidence

Cited by 75 publications

References 33 publications

Investor induced contagion during the banking and European sovereign debt crisis of 2007–2012: Wealth effect or portfolio rebalancing?

Investor induced contagion during the banking and European sovereign debt crisis of 2007–2012: Wealth effect or portfolio rebalancing?

Return and Volatility Spillover between Financial Market Participants of Dhaka Stock Exchange Using Asymmetric GARCH Methods

Robust global stock market interdependencies

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