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Our purpose in this paper is to examine financial contagion using the DCC GARCH (1, 1) technique and a correlation test. Our sample includes stock returns of 10 emerging markets from 1 January 2005 to 01 July 2010. The DCC GARCH (1, 1) results indicate a significant conditional correlation between emerging markets returns (Argentina, Brazil, Korea,...
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Citations
... These studies were suffering from omitted variables, heteroscedasticity and endogeneity problems. Some authors proposed multivariate approach González-Hermosillo SN Bus Econ (2023) 3:7 Page 5 of 27 7 et al. (2005b), DCC test (Rigobon 2003), and DCC GARCH (Khemiri et al. 2010) to correct heteroscedasticity effects. In a recent study, Zorgati and Lakhal (2020) used adjusted and local correlation measures, based on the polynomial local regression, and found that simple and adjusted correlations were not enough to explain the spatial effect of contagion. ...
Unlabelled:
In this paper, we propose a new approach to studying the spread of financial crises, their effects, and origins. To do this, an empirical measure of the degree of crisis transmission is introduced in the context of a crisis propagation model that corresponds to a multifactorial switching model with random endogenous transition variable. The latter is modeled as a diffusion process and allows us to determine whether crisis transmission is perfect, partial, or weak and whether it is due to contagion or interdependence effects. In addition, the model takes into account the relative impact of idiosyncratic and global factors in crisis and non-crisis periods, as well as any lag in the crisis transmission process. We used the genetic algorithm as an empirical method, because it uses probabilistic rather than deterministic transition rules, which is appropriate for our work. Our results suggest that the subprime crisis is perfectly or partially transmitted to developed markets and interdependence effects are due to most of them. However, the transmission to emerging markets is only partial or weak and, in most cases, due to contagion effects. Moreover, the significance of the coefficients of idiosyncratic factors was not related to crisis effects. For many countries, these coefficients were higher than the coefficients of the global factors, while crisis transmission was due to contagion effects. Our results exceed those of alternative studies on crisis transmission and provide important portfolio and risk management insights. By understanding the crisis transmission mechanism, investors and risk managers can make appropriate decisions to hedge against market downturns and reduce risk out of the country.
Supplementary information:
The online version contains supplementary material available at 10.1007/s43546-022-00361-9.
... According to Naoui et al. (2010), significant increase in the possibility of crisis in one country increases because of the crisis that occurred in another country. To another definition, contagion is significant increases in the relationships, which are measured by the co-movements of the asset prices and financial flows, after a shock compared to stable periods (Dornbusch et al. 2000). ...
... Covering a similar sample period (1990 to 2003) and using the same methodology, Chiang et al. (2007) confirmed the presence of the contagion and revealed that the crisis propagated in two steps: first because of investors who considered the local information, a panic occurred; and in the second step, herding behavior occurred because of the general information obtained from alerted investors. Using the DCC model, Naoui et al. (2010) investigated the subprime mortgage crisis and the presence of a contagion effect from the US stock market to the stock markets of ten Asian and Latin American emerging countries (Argentina, Brazil, Hong Kong, Indonesia, Korea, Malaysia, Mexico, Shanghai, Singapore and Taiwan). The authors empirically prove the presence of the contagion effect from the USA to Argentina, Brazil, Korea, Hong Kong, Malaysia, Mexico and Singapore. ...
Purpose
This paper aims to test whether the latest global financial crisis propagated contagiously from the USA to the rest of the world.
Design/methodology/approach
If the reason of the propagation of a crisis is a normal time interdependence with the crisis origin country due to real linkages, the spread of crisis can be limited by implementing well-defined preventive policies. On the other hand, if a crisis propagates because of the speculative attacks or irrational behaviors, the “national policymakers will face difficulties in protecting their markets from such a crisis” (Kleimeier et al., 2003, p. 2). Therefore, separation of contagion and interdependence may provide crucial insights for policymakers to implement appropriate policies to prevent and/or stop the financial crisis. Hence, this paper compares the heteroscedasticity-corrected conditional correlations and dynamic conditional correlations in the tranquil and shock periods.
Findings
The findings were quite straightforward and consistent for both Forbes and Rigobon heteroscedasticity correction technique and dynamic conditional correlation (DCC) model. The Forbes and Rigobon technique failed to reject the null of no contagion for 25 countries in our data sample, while the DCC model failed to reject the null of no contagion for 21 countries. While heteroscedasticity-corrected correlation technique confirmed the presence of a contagion for six countries, the DCC technique confirmed the presence of a contagion for ten countries.
Originality/value
This study particularly investigates whether the subprime mortgage crisis spilled over contagiously to the rest of the world. To investigate whether there is a significant increase in the cross-market correlations between the crisis origin country, the USA and the rest of the world markets during the latest financial crisis, both heteroscedasticity-corrected correlation technique and DCC model are used.Therefore, this study possibly contributes well to the literature using a large country set and conducting the analysis from different angles for important properties.
... Our sample period covers the period of January 1, 2005 to March 31, 2009 and it is divided into two sub-periods as the pre-crisis period and crisis period so as to be able to examine the possible changes in co-movement relations. Naoui et al. (2010) suppose that the explosion of the subprime bubble occurred on August 1, 2007 when the US stock markets began to show sharp declines approximately around that date. Therefore, we construct the pre-crisis period such that it covers a period of two and a half years prior to that date. ...
... It involves a comparative analysis of pairs of selected countries and is conducted by means of contagion detection models, built in such a way as to present variations in residual standard deviations. The crises of the 1990s and of the 21st century were mainly financial ones, connected with the problems in the banking sector (Janiga-Ćmiel, 2016, A), (Rigobon, 2003), (Naoui et al., 2010). Crises were explored by scientists from many countries, including: M. K. Brunnermeier, P. O. Gourinchas, S. S. Skrzypek. ...
The paper discusses the relationship between the company’s export activity and its willingness to implement eco- innovative technologies under globalization. The authors investigate eco-innovative activities of exporters according to their size, and determine the relationship between eco-innovations and export of enterprises of different sizes (small, medium, large) in the case of Ukraine. Two hypotheses are tested: the first one suggests that exporters are more environmentally innovative; the second one argues that size is positively correlated with the environmental technologies implementation. The results of econometric analysis using logit and probit models demonstrate that both hypotheses may be accepted in most cases, and the size of the company and its export activities really do influence the spread of environment-friendly technologies. The larger firm size has the more significantly foreign trade (especially export performance) impacts on their eco-innovations. Instead, export performance of small businesses has a little effect on eco-innovations, moreover, the size showed a negative effect on the eco-innovations. It might be explained by the fact that small businesses generally do not have the financial resources for the eco-innovations and choose to enter foreign markets less commonly.
... Our sample period covers the period of January 1, 2005 to March 31, 2009 and it is divided into two sub-periods as the pre-crisis period and crisis period so as to be able to examine the possible changes in co-movement relations. Naoui et al. (2010) suppose that the explosion of the subprime bubble occurred on August 1, 2007 when the US stock markets began to show sharp declines approximately around that date. Therefore, we construct the pre-crisis period such that it covers a period of two and a half years prior to that date. ...
... Our sample period covers the period of January 1, 2005 to March 31, 2009 and it is divided into two sub-periods as the pre-crisis period and crisis period so as to be able to examine the possible changes in co-movement relations. Naoui et al. (2010) suppose that the explosion of the subprime bubble occurred on August 1, 2007 when the US stock markets began to show sharp declines approximately around that date. Therefore, we construct the pre-crisis period such that it covers a period of two and a half years prior to that date. ...
Comparing tranquil and shock periods' dynamic conditional correlations; this study tests the widely accepted belief of the significance of a " contagion effect " from the US to emerging European countries during the latest global financial crisis. The results reveal that although the contagion effect is the most blamed factor for the propagation of financial crises, particularly for the last global financial crisis, the presence of contagion effect from the US market (crisis-origin country) is not that certain since the conclusion is highly dependent on econometric specifications and sample period diversifications.
... The sample period covers the period of January 1, 2005 to March 31, 2009 and it is divided into two sub-periods as the pre-crisis period and crisis period so as to be able to examine the possible changes in co-movement relations. Naoui et al. (2010) suppose that the explosion of the subprime bubble occurred on August 1, 2007 when the US stock markets began to show sharp declines approximately around that date. Therefore, we construct the pre-crisis period such that it covers a period of two and a half years prior to that date. ...
Politikanın ekonomi üzerindeki yadsınamaz yönlendirme gücü, özellikle iktidarın seçim zamanlarında yeniden seçilebilme amacıyla birlikte ortaya çıkmaktadır. Bu süreçte bir manipülasyon aracı görevi üstlenen politik konjonktür teorileri, ekonomiyi parasal ve mali politikalarla etkileyip politik çıkarları ön plana çıkarmayı amaçlar. Politik konjonktür teorileri, politikanın ekonomi üzerindeki etkisinin ve bu etki sonucu mevcut ekonomilerde meydana gelen değişimlerin araştırıldığı çalışmalardır. Politik konjonktür teorileri, “Geleneksel Partizan Politik Konjonktür Teorisi”, “Geleneksel Fırsatçı Politik Konjonktür Teorisi”, “Rasyonel Partizan Politik Konjonktür Teorisi” ve “Rasyonel Fırsatçı Politik Konjonktür Teorisi” olmak üzere dört farklı teori temelinde irdelenmektedir. Çalışmada öncelikle politika ve ekonomi etkileşimleri değerlendirilerek politika-ekonomi ilişkileri iktisadi yaklaşımlar temelinde açıklanacaktır. Devamında konjonktürlerin tahlili ve aşamaları anlatılarak politik konjonktür teorisi türleri temellendirilmeye çalışılacaktır.
... Determination of crisis period is a very difficult decision (Kaminsky & Schmukler, 1999). We split the study period into three sub-periods include (i) pre-crisis period or quiet period from 1 January 2004 to 31 July 2007; (ii) crisis period from 1 August 2007 to 26 February 2010; and (iii) post-subprime crisis period from 27 February 2010 to 19 December 2011 (Horta et al., 2009;Naoui, Liouane & Brahim, 2010a;Naoui, Khemiri & Liouane, 2010b). The significant change (increase) in the degree of correlation has been taken as a measure of contagion. ...
The study seeks to examine the contagion effect of the global financial crisis on the major Asian markets, namely, China, Hong Kong, Indonesia, South Korea, Malaysia, Japan, India and Taiwan. The study incorporates the impact of leverage effect in the dynamic conditional correlation generalized autoregressive conditional heteroskedasticity (DCC-GARCH) framework to achieve the goal. The US is taken as the crisis-originating country. The period of study has been divided into three categories, namely, pre-crisis period, crisis period and post-crisis period, to examine the sudden change in average conditional correlation from one period to other period so as to identify the contagion effect. The findings support the contagion effect from US market to the major Asian markets with the exception of Japan. Policy makers seek to study the existence of contagion among markets so that they can strategically manage risk and it further helps in asset allocation. If the markets are contagious, then the investors will be unable to reap benefits through international diversification of portfolio. In such a case, the policy makers will further frame policies so that they can insulate themselves from inflicting heavy damage from various crises.
... Em sentido oposto, Agmon (1972) e Branch (1974 não identificaram evidências de interdependência entre os mercados bolsistas internacionais por eles estudados. Bertoneche (1979) (Eun & Shim, 1989;Lau & Mcinish, 1996;Arshanapalli, Doukas & Lang, 1995 Recorrendo igualmente ao teste de cointegração de Johansen, outros trabalhos concluíram em sentido contrário, não identificando relações de longo prazo entre mercados bolsistas (Li, 2006;Olusi & Abdul-Majid, 2008;Karim et al., 2010) ou identificando sinais muito ténues (Ahlgren & Antell, 2002 (Horta et al., 2008;Toussaint, 2008;Naoui et al., 2010). Para além dos subperíodos de crise, foi ainda considerado um terceiro subperíodo, que corresponde a uma situação de uma certa estabilidade de mercado, de (0,00000) (0,00000) (0,00000) (0,00000) (0,00000) (0,00000) (0,00000) (0,00000) (0,00000) (0,00000) (0,00000) (0,00000) ...
RESUMO Neste trabalho é estudado o impacto da crise financeira global no comportamento dos mercados bolsistas internacionais, quer no curto prazo quer no longo prazo. Com este objetivo foram selecionados doze mercados bolsistas internacionais e escolhido o período compreendido entre 4/10/1999 e 30/06/2011. Para analisar o comportamento dos mercados numa perspetiva de curto prazo, recorreu-se ao modelo multivariado de correlação condicional dinâmica (DCC-GARCH), desenvolvido por Engle (2002), e ao teste de valores extremos, de modo a analisar as consequências da emergência da crise financeira global. Os coeficientes de correlação dinâmica permitiram concluir que ocorreu um aumento significativo no último subperíodo, confirmando a existência de efeitos de contágio entre os mercados bolsistas estudados. Complementarmente, os testes de valores extremos evidenciaram o mês de outubro de 2008 como o ponto crítico desse efeito. A análise de componentes principais permitiu evidenciar a ocorrência de algumas relações de equilíbrio de longo prazo entre os mercados, em especial nos subperíodos amostrais relativos a fases de crise. Palavras-chave: Mercados bolsistas internacionais, crise financeira global, modelos multivariados.
