Is there life in the old dogs yet? Making break-tests work on financial contagion

Is there life in the old dogs yet? Making break-tests work on financial contagion Many tests of financial contagion require a definition of the dates separating calm from crisis periods. We propose to use a battery of break search procedures for individual time series to objectively identify potential break dates in relationships between countries. Applied to the biggest European stock markets and combined with two well established tests for financial contagion, this approach results in break dates which correctly identify the timing of changes in cross-country transmission mechanisms. Application of break search procedures breathes new life into the established contagion tests, allowing for an objective, data-driven timing of crisis periods. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

Is there life in the old dogs yet? Making break-tests work on financial contagion

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Publisher
Springer Journals
Copyright
Copyright © 2012 by Springer Science+Business Media, LLC
Subject
Economics / Management Science; Finance/Investment/Banking; Accounting/Auditing; Econometrics; Operations Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-012-0278-z
Publisher site
See Article on Publisher Site

Abstract

Many tests of financial contagion require a definition of the dates separating calm from crisis periods. We propose to use a battery of break search procedures for individual time series to objectively identify potential break dates in relationships between countries. Applied to the biggest European stock markets and combined with two well established tests for financial contagion, this approach results in break dates which correctly identify the timing of changes in cross-country transmission mechanisms. Application of break search procedures breathes new life into the established contagion tests, allowing for an objective, data-driven timing of crisis periods.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Apr 25, 2012

References

  • Modelling return and conditional volatility exposures in global stock markets
    Cai, C; Faff, R; Hillier, D; McKenzie, M
  • Variation in stock return risks: an international comparison
    Chiou, WJP; Lee, AC; Lee, C-F

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