Extreme Contagion in Equity Markets
May 1, 2002
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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
Pages:
25
Volume:
2002
DOI:
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Issue:
098
Series:
Working Paper No. 2002/098
Stock No:
WPIEA0982002
ISBN:
9781451852158
ISSN:
1018-5941
