Global Crises and Equity Market Contagion
Geert Bekaert,
Michael Ehrmann,
Marcel Fratzscher () and
Arnaud Mehl
No 17121, NBER Working Papers from National Bureau of Economic Research, Inc
Abstract:
Using the 2007-09 financial crisis as a laboratory, we analyze the transmission of crises to country-industry equity portfolios in 55 countries. We use a factor model to predict crisis returns, defining unexplained increases in factor loadings and residual correlations as indicative of contagion. We find statistically significant evidence of contagion from US markets and from the global financial sector, but the effects are economically small. By contrast, there has been substantial contagion from domestic equity markets to individual domestic equity portfolios, with its severity inversely related to the quality of countries' economic fundamentals and policies. This confirms the old "wake-up call" hypothesis, with markets and investors focusing substantially more on country-specific characteristics during the crisis.
JEL-codes: G01 G15 (search for similar items in EconPapers)
Date: 2011-06
New Economics Papers: this item is included in nep-cba, nep-fmk and nep-ifn
Note: AP IFM
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Citations: View citations in EconPapers (139)
Published as Geert Bekaert & Michael Ehrmann & Marcel Fratzscher & Arnaud Mehl, 2014. "The Global Crisis and Equity Market Contagion," Journal of Finance, American Finance Association, vol. 69(6), pages 2597-2649, December.
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Related works:
Journal Article: The Global Crisis and Equity Market Contagion (2014)
Working Paper: The Global Crisis and Equity Market Contagion (2014)
Working Paper: Global crises and equity market contagion (2011)
Working Paper: Global crises and equity market contagion (2011)
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