Title

Stock market interdependence, contagion, and the U.S. financial crisis: The case of emerging and frontier markets

Department/School

Finance

Date of this version

2011

Document Type

Article

Keywords

Interdependence; Contagion; U.S. financial crisis; Emerging markets; Shock models

Abstract

This paper examines transmission of shocks between the U.S. and foreign markets to delineate interdependence from contagion of the U.S. financial crisis by constructing shock models for partially-overlapping and non-overlapping markets. There exists important bi-directional, yet asymmetric, interdependence and contagion in emerging markets, with important regional variations. Interdependence is driven more by U.S. shocks, while contagion is driven more by emerging market shocks. Frontier markets also exhibit interdependence and contagion to U.S. shocks. Except for Latin America, there is no contagion from U.S. to emerging markets. But there is contagion from emerging markets to the U.S.

Published in

Journal of International Financial Markets, Institutions, and Money

Citation/Other Information

Vol 21 (2011) pg 724-742