Open AccessEast Asian Financial Contagion under DCC-Garch
Author(s) -
J. H. Cho,
Ali M. Parhizgari
Publication year - 2009
Publication title -
international journal of banking and finance
Language(s) - English
Resource type - Journals
ISSN - 1675-722X
DOI - 10.32890/ijbf2009.6.1.8380
Subject(s) - financial contagion , equity (law) , contagion effect , autoregressive conditional heteroskedasticity , economics , financial market , east asia , econometrics , monetary economics , financial crisis , finance , geography , volatility (finance) , macroeconomics , political science , china , law , archaeology
We reconsider the definition and measurement of contagion by analyzing the 1997 East Asian financial crisis in the equity markets of eight countries using dynamic conditional correlation (DCC). Taking Thailand and Hong Kong as alternative sources of contagion, a total of fourteen source-target pairs is analyzed. We define contagion as the statistical break in the computed DCCs as measured by the shifts in their means and medians. In the DCC process, the parameters of each pair of source-target country contagion are allowed to vary and be dictated by the data. Contagion is tested using DCC means and medians difference tests. Our findings indicate the presence of contagion in the equity markets across all the fourteen pairs of source-target countries that are considered.
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