Journal
JOURNAL OF BUSINESS RESEARCH
Volume 104, Issue -, Pages 350-365Publisher
ELSEVIER SCIENCE INC
DOI: 10.1016/j.jbusres.2019.07.031
Keywords
Contagion; Crises; Regime switching; Stylized portfolios
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We examine the size of contagion (i.e., integration and co-movement) of weighted portfolios on a global level determining whether the amplification of transmission channels among either emerging or developed financial markets can be affected by different values of a country's characteristics (macro-economic variables) on a regional and global level. To this end, we investigate a large sample of 4577 trading days from sixty-eight international equity markets, taking into consideration both the regional and global setting. The dataset begins on January 3, 2000 and ends on August 31, 2017. The employed methodology concerns a regime-switching generalized autoregressive conditional heteroskedasticity model in accordance with a worldwide regional-local capital asset pricing model. Moreover, two different contagion tests are utilized to examine whether international equity portfolios experienced contagion effects through increased co-movements during periods of financial crises. Our key findings point to distinct shifts in co-movement that are detected either on the regional or global level. The robustness analysis provides more evidence of the contagion effect at the regional level from the US crisis.
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