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Journal ArticleDOI

Global financial crisis and emerging stock market contagion: A multivariate FIAPARCH–DCC approach

TL;DR: In this paper, the contagion effects of the global financial crisis in a multivariate Fractionally Integrated Asymmetric Power ARCH (FIAPARCH) dynamic conditional correlation (DCC) framework during the period 1997-2012 were investigated.
About: This article is published in International Review of Financial Analysis.The article was published on 2013-12-01. It has received 304 citations till now. The article focuses on the topics: Financial crisis & Stock market.
Citations
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Journal ArticleDOI
TL;DR: In this article, the authors analyzed the connectedness between the recent spread of COVID-19, oil price volatility shock, the stock market, geopolitical risk and economic policy uncertainty in the US within a time-frequency framework.

792 citations


Cites background from "Global financial crisis and emergin..."

  • ...Goodell (2020) discusses the economic and social impact of COVID-19 making parallels with previous crisis events. In corporate finance, Corbet et al. (2020a) analysed the impacts of being named “corona” on return and volatility behaviour of stocks during the COVID-19 pandemics....

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  • ...8 effects of COVID-19 pandemic with past epidemic and pandemic events, such as SARS in 2017, H1N1 in 2009, and MERS in 2012, Ebola in 2014, and Zika in 2016, as identified by Jamison et al. (2017). Goodell (2020) discusses the economic and social impact of COVID-19 making parallels with previous crisis events....

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  • ...Goodell (2020) discusses the economic and social impact of COVID-19 making parallels with previous crisis events....

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Journal ArticleDOI
TL;DR: The empirical results show that listed firms across these countries, financial and non-financial firms alike, experience significant increase in conditional correlations between their stock returns, however, the magnitude of increase in these correlations is considerably higher for financial firms during the COVID-19 outbreak.

533 citations


Cites result from "Global financial crisis and emergin..."

  • ...The results of higher DCCs during this crisis period are consistent with those studies on the global financial crisis (Akhtaruzzaman et al., 2014; Dimitriou et al., 2013; Kim et al., 2015)....

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Journal ArticleDOI
TL;DR: In this article, the authors analyzed the connectedness between the recent spread of COVID-19, oil price volatility shock, the stock market, geopolitical risk and economic policy uncertainty in the US within a time-frequency framework.
Abstract: In this paper, we analyze the connectedness between the recent spread of COVID-19, oil price volatility shock, the stock market, geopolitical risk and economic policy uncertainty in the US within a time-frequency framework. The coherence wavelet method and the wavelet-based Granger causality tests applied to US recent daily data unveil the unprecedented impact of COVID-19 and oil price shocks on the geopolitical risk levels, economic policy uncertainty and stock market volatility over the low frequency bands. The effect of the COVID-19 on the geopolitical risk substantially higher than on the US economic uncertainty. The COVID-19 risk is perceived differently over the short and the long-run and may be firstly viewed as an economic crisis. Our study offers several urgent prominent implications and endorsements for policymakers and asset managers

398 citations

Journal ArticleDOI
TL;DR: The authors examined the dependence structure between the emerging stock markets of the BRICS countries and influential global factors using the quantile regression approach, and found that the stock markets exhibit dependence with the global stock and commodity markets (S&P index, oil, and gold) as well as changes in the U.S. stock market uncertainty (CBOE Volatility Index).

347 citations


Cites background or methods from "Global financial crisis and emergin..."

  • ...Using the multivariate Dynamic Conditional Correlation – Fractionally Integrated Asymmetric Power ARCH (DCC-FIAPARCH) model, Dimitriou et al. (2013) find an increasing co-movement between the BRICS and U.S. markets during the post-crisis period (from early 2009 onwards), implying that the…...

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  • ...Although several papers have considered different starting dates for the global financial crisis (e.g., Reboredo, 2012; Xu and Hamori, 2012; Ahmad et al., 2013; Dimitriou et al., 2013; Liu et al., 2013), we focus on the behavior of crude oil prices to mark the date of the financial crisis....

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Journal ArticleDOI
TL;DR: The authors provided some preliminary estimates about the behavior of oil-stock nexus during the COVID-19 pandemic and found that stock markets may experience greater initial and prolonged impacts of own and cross shocks during the pandemic than the period before it.

210 citations

References
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Journal ArticleDOI
TL;DR: In this article, a modified GARCH-M model was used to find a negative relation between conditional expected monthly return and conditional variance of monthly return, using seasonal patterns in volatility and nominal interest rates to predict conditional variance.
Abstract: We find support for a negative relation between conditional expected monthly return and conditional variance of monthly return, using a GARCH-M model modified by allowing (1) seasonal patterns in volatility, (2) positive and negative innovations to returns having different impacts on conditional volatility, and (3) nominal interest rates to predict conditional variance. Using the modified GARCH-M model, we also show that monthly conditional volatility may not be as persistent as was thought. Positive unanticipated returns appear to result in a downward revision of the conditional volatility whereas negative unanticipated returns result in an upward revision of conditional volatility. THE TRADEOFF BETWEEN RISK and return has long been an important topic in asset valuation research. Most of this research has examined the tradeoff between risk and return among different securities within a given time period. The intertemporal relation between risk and return has been examined by several authors-Fama and Schwert (1977), French, Schwert, and Stambaugh (1987), Harvey (1989), Campbell and Hentschel (1992), Nelson (1991), and Chan, Karolyi, and Stulz (1992), to name a few. This paper extends that research.

7,837 citations

Journal ArticleDOI
TL;DR: In this article, a new class of multivariate models called dynamic conditional correlation models is proposed, which have the flexibility of univariate generalized autoregressive conditional heteroskedasticity (GARCH) models coupled with parsimonious parametric models for the correlations.
Abstract: Time varying correlations are often estimated with multivariate generalized autoregressive conditional heteroskedasticity (GARCH) models that are linear in squares and cross products of the data. A new class of multivariate models called dynamic conditional correlation models is proposed. These have the flexibility of univariate GARCH models coupled with parsimonious parametric models for the correlations. They are not linear but can often be estimated very simply with univariate or two-step methods based on the likelihood function. It is shown that they perform well in a variety of situations and provide sensible empirical results.

5,695 citations


"Global financial crisis and emergin..." refers background in this paper

  • ...5 Engle (2002) presents a different form of DCC model....

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Journal ArticleDOI
TL;DR: The authors showed that correlation coefficients are conditional on market volatility, and that there was virtually no increase in unconditional correlation coefficients (i.e., no contagion) during the 1997 Asian crisis, 1994 Mexican devaluation, and 1987 U.S. market crash.
Abstract: Heteroskedasticity biases tests for contagion based on correlation coefficients. When contagion is defined as a significant increase in market comovement after a shock to one country, previous work suggests contagion occurred during recent crises. This paper shows that correlation coefficients are conditional on market volatility. Under certain assumptions, it is possible to adjust for this bias. Using this adjustment, there was virtually no increase in unconditional correlation coefficients (i.e., no contagion) during the 1997 Asian crisis, 1994 Mexican devaluation, and 1987 U.S. market crash. There is a high level of market comovement in all periods, however, which we call interdependence.

3,389 citations

Journal ArticleDOI
TL;DR: In this article, a new estimator of the long memory parameter in these models is proposed, based on the simple linear regression of the log periodogram on a deterministic regressor.
Abstract: . The definitions of fractional Gaussian noise and integrated (or fractionally differenced) series are generalized, and it is shown that the two concepts are equivalent. A new estimator of the long memory parameter in these models is proposed, based on the simple linear regression of the log periodogram on a deterministic regressor. The estimator is the ordinary least squares estimator of the slope parameter in this regression, formed using only the lowest frequency ordinates of the log periodogram. Its asymptotic distribution is derived, from which it is evident that the conventional interpretation of these least squares statistics is justified in large samples. Using synthetic data the asymptotic theory proves to be reliable in samples of 50 observations or more. For three postwar monthly economic time series, the estimated integrated series model provides more reliable out-of-sample forecasts than do more conventional procedures.

3,070 citations

Posted Content
TL;DR: In this article, the authors examined stock market co-movements and applied these concepts to test for stock market contagion during the 1997 East Asian crises, the 1994 Mexican peso collapse, and the 1987 U.S. stock market crash.
Abstract: This paper examines stock market co-movements. It begins with a discussion of several conceptual issues involved in measuring these movements and how to test for contagion. Standard tests examine if cross-market correlation in stock market returns increase during a period of crisis. The measure of cross-market correlations central to this standard analysis, however, is biased. The unadjusted correlation coefficient is conditional on market movements over the time period under consideration, so that during a period of turmoil when stock market volatility increases, standard estimates of cross-market correlations will be biased upward. It is straightforward to adjust the correlation coefficient to correct for this bias. The remainder of the paper applies these concepts to test for stock market contagion during the 1997 East Asian crises, the 1994 Mexican peso collapse, and the 1987 U.S. stock market crash. In each of these cases, tests based on the unadjusted correlation coefficients find evidence of contagion in several countries, while tests based on the adjusted coefficients find virtually no contagion. This suggests that high market co-movements during these periods were a continuation of strong cross-market linkages. In other words, during these three crises there was no contagion, only interdependence.

3,038 citations