Financial Spillovers to Emerging Markets During the Global Financial Crisis

Czech Journal of Economics and Finance (Finance a uver) 01/2009; 59(6):507-521. DOI: 10.5089/9781451872514.001
Source: RePEc


Using data from the recent crisis, the authors analyze financial linkages between market liquidity and bank solvency measures in advanced economies and emerging market bond and stock markets. A multivariate generalized autoregressive conditional heteroskedasticity model is estimated to gauge the extent of co-movements of these financial variables across markets. The findings indicate that the notion of possible decoupling of financial markets had been misplaced. In fact, interlinkages between funding stress and equity markets in advanced economies and emerging market financial indicators were highly correlated, and have seen sharp increases during specific crisis moments.

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    • "The sample period is from 01/06/2004–08/20/2013 and based on weekly data. The period of the structural break is chosen to be at August 1, 2007 because this was when the US real estate problem developed into a crisis (Frank and Hesse, 2009; Kiff and Mills, 2008). The commencement of the crisis can actually be traced back to the middle of 2005. "
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    ABSTRACT: We investigate the extent by which real estate markets are integrated with the world market. We apply a case-wise bootstrap analysis — a method that is robust to non-normality and increased volatility that characterises financial markets, especially during periods of distress. We also take into account the effect of the global financial crisis. Our investigation is conducted in relation to five most important and highly internationalised real estate markets, namely, the US, UK, Japan, Australia and the United Arab Emirates (UAE). We find that the first four markets are integrated with the world market — with Japan, the US, and the UK being the most integrated, but the last one is not. Our results also show that the US real estate market crisis affected the five markets differently. It made the UAE, Australia and the US real estate markets more integrated internationally but resulted in the Japanese market becoming less globally integrated. In the case of the UK, the crisis did not affect at all its level of integration with the world market.
    Full-text · Article · Feb 2014 · Economic Modelling
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    • "Following the same methodology as Frank et al . ( 2009 )"
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    ABSTRACT: In this article, we test the hypothesis of contagion amongst sectors within the United States’ economy during the subprime crisis. The econometric methodology applied here is based on the dynamic conditional correlation model proposed by Engle (2002). Further, we applied several Lagrange multiplier (LM)-robust tests to test whether there were structural breaks in series’ dependency structures during the period of interest. Events theoretically classified as relevant to the crisis upshots as well as the interactions between the moments of the series were used as indicator functions to the referred structural breaks. The main conclusion of this study is that one can indeed observe contagion within almost all pairs of sectors’ indices. Thus, we conclude that the dependency structure of the sectors of interest has faced structural changes during the years of 2007 and 2008. Hence, diversification strategies as well as the risk analysis inherent to the portfolios’ management may have been drastically affected.
    Full-text · Article · Sep 2013 · Applied Economics
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    • "The spillover effects are evident during periods of turmoil, in correspondence with particular shocks, such as the Lehman Brothers' crack in September 2008 (see, for example, Bordo, 2008, and Frank and Hesse, 2009). "
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    ABSTRACT: Clustering financial time series is a recent topic of statistical literature with important fields of applications, in particular portfolio composition and risk evaluation. The risk is generally linked to the volatility of the asset, but its level of predictability also plays a basic role in investment decisions. In particular, the classification of a certain asset could be linked to its dependence on the volatility of a dominant market: movements in the volatility of the dominant market can provide similar movements in the volatility of the asset and its predictability would depend on the strength of this dependence. Working in a model based framework, we base the classification of the volatility of an asset not only on its volatility level, but also on the presence of spillover effects from a dominant market, such as the U.S. one, and on the similarity of the dynamics of the asset and the dominant market. The method is carried out using an extended version of the Multiplicative Error Model and is applied to a set of European assets.
    Full-text · Technical Report · Jan 2013
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