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Detecting contagion with correlation: Volatility and timing matter
journal contribution
posted on 2023-05-17, 18:14 authored by Dungey, M, Yalama, AThe detection of contagion effects is sensitive to controlling for volatility changes between periods of tranquility and periods of crisis. An additional consideration is the use of synchronised data for geographically separated markets. We demonstrate how these effects can combine in a practical application to detecting contagion in European equity markets in the period of 2007-2009. Without controlling for volatility clustering synchronization does not apparently matter. Once volatility clustering is accounted for synchronized data dramatically changes results. Our preferred results indicate relatively little evidence for contagion effects flowing directly from US equity markets to those of Europe during the crisis itself, and more evidence of continued transmission during the post crisis period-potentially reflecting unsettled conditions associated with the burgeoning Greek debt crisis.
History
Publication title
International Journal of Applied Business and Economic ResearchVolume
10Pagination
85-95ISSN
0972-7302Department/School
TSBEPublisher
Scientific PublishersPlace of publication
IndiaRights statement
Copyright 2012 Serials Publications, IndiaRepository Status
- Restricted