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Detecting contagion with correlation: Volatility and timing matter

Citation

Dungey, M and Yalama, A, Detecting contagion with correlation: Volatility and timing matter, International Journal of Applied Business and Economic Research, 10, (1) pp. 85-95. ISSN 0972-7302 (2012) [Refereed Article]

Copyright Statement

Copyright 2012 Serials Publications, India

Official URL: http://www.serialspublications.com/journals1.asp?j...

Abstract

The 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.

Item Details

Item Type:Refereed Article
Keywords:contagion, interdependence, timing, volatility spillover
Research Division:Economics
Research Group:Applied Economics
Research Field:International Economics and International Finance
Objective Division:Economic Framework
Objective Group:Macroeconomics
Objective Field:Macroeconomics not elsewhere classified
Author:Dungey, M (Professor Mardi Dungey)
ID Code:84988
Year Published:2012
Deposited By:Research Division
Deposited On:2013-06-11
Last Modified:2017-11-28
Downloads:0

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