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Financial contagion across G10 stock markets: A study during major crises
Author(s) -
BenSaïda Ahmed,
Litimi Houda
Publication year - 2021
Publication title -
international journal of finance and economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 39
eISSN - 1099-1158
pISSN - 1076-9307
DOI - 10.1002/ijfe.2041
Subject(s) - economics , financial contagion , financial crisis , monetary economics , stock (firearms) , financial market , shock (circulatory) , contagion effect , recession , stock market , financial economics , finance , macroeconomics , mechanical engineering , medicine , paleontology , horse , biology , engineering
Abstract The multiple financial crises that occurred during the last two decades have stimulated scholars to investigate the cross‐market linkages and how shocks are transmitted across borders. Researchers usually examine financial contagion and its effects during a single period of study based on static models. This paper employs a regular vine copula specification to model the dependence dynamics across the G10 stock markets, by analysing the impacts during tranquillity periods and during each crisis episode studied apart. Empirical findings show significant differences in the connectedness, with distinctive shock transmission paths during every sub‐period. The results suggest a strong evidence of contagion during the global financial crisis and the European sovereign debt crisis. However, during the market downturn of 2002, there was no significant contagion due to the lack of market integration then. Besides, in the aftermath of the Brexit vote, Eurozone members took measures to reduce possible shock transmission and eliminate contagion.