Extreme Contagion in Equity Markets

By James Y. Yao, Jorge A Chan-Lau, Donald J Mathieson

May 1, 2002

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Format: Chicago

James Y. Yao, Jorge A Chan-Lau, and Donald J Mathieson. Extreme Contagion in Equity Markets, (USA: International Monetary Fund, 2002) accessed December 24, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This study uses bivariate extremal dependence measures, based on the number of equity return co-exceedances in two markets, to quantify both negative and positive equity returns contagion in mature and emerging equity markets during the past decade. The results indicate (a) higher contagion for negative returns than for positive returns; (b) a secular increase in contagion in Latin America not matched in other regions; (c) global increases in contagion following the 1998 financial crises; and (d) that the use of simple correlations as a proxy for contagion could be misleading, as the former exhibit low correlation with extremal dependence measures of contagion.

Subject: Emerging and frontier financial markets, Financial crises, Financial institutions, Financial integration, Financial markets, Stock markets, Stocks

Keywords: Bear market contagion, Bull market contagion, Contagion, Contagion pattern, East Asia, Emerging and frontier financial markets, Equity markets, Extreme value theory, Financial integration, Global, Market crash, Mature market, Stock markets, Stocks, Transmission mechanism, WP

Publication Details

Pages:

25
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2002/098
Stock No:

WPIEA0982002
ISBN:

9781451852158
ISSN:

1018-5941

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