Work

Market Integration and Contagion

Year: 2005

Type: article

Abstract: Contagion is usually defined as correlation between markets in excess of what would be implied by economic fundamentals. However, there is considerable disagreement regarding the definitions of the fundamentals, how the fundamentals might differ across countries and the mechanisms that link the fundamentals to asset returns. Our research takes as a starting point, a two-factor model with time-varying betas that accommodates various degrees of market integration between the different markets. We apply this model to stock returns in three different regions, Europe, South-East Asia and Latin America. In addition to providing new insights on contagion during crisis periods, we document patterns through time in world and regional market integration and measure the proportion of volatility driven by global, regional, as well as, local factors.

Source: The Journal of Business

DOI: 10.1086/426519

Authors: Geert Bekaert, Campbell R. Harvey, Angela Ng

Institutions: National Bureau of Economic Research, Duke University, Hong Kong University of Science and Technology, Columbia University

Language: English

Topic: Financial Risk and Volatility Modeling

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: green

Funder: National Science Foundation

OpenAlex ID: W3023758731

FWCI: 60.24

Cites: 49

Cited by: 1,094

Related to: 9