Contagion Versus Interdependence: A Re-Examination of Asian-Crisis Stock Market Comovements
27 Pages Posted: 21 Jul 2003
Date Written: February 2003
Abstract
This paper presents a framework based on correlation analysis to test for contagion during the episode of financial turmoil surrounding the Asian crisis. In particular, we calculate conditional and unconditional correlation coefficients for 15 countries. We advocate the use of synchronous instead of synchronized data to correctly measure stock market comovements. Considering the two different phases of the Asian crisis, reveals that synchronized data lead to an over-identification of contagion for the early Thailand crisis phase but an under-identification of contagion during the late Hong Kong crisis phase. When using synchronous data, we find little evidence of a significant change in the transmission mechanisms from Thailand to any of the other country in our sample as most financial shocks are thus transmitted through non-crisis-contingent channels. Contrary to the Thailand finding, we find evidence of contagion from the Hong Kong stock market to most of the other stock markets in our sample. This is in contrast with the findings of Forbes and Rigobon (2002) and suggests that most shocks are transmitted through crisis-contingent channels. Overall, our findings should caution researchers and practitioners alike when drawing conclusions based on synchronized data.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Electronic Finance: Reshaping the Financial Landscape Around the World
By Stijn Claessens, Thomas Glaessner, ...
-
E-Finance in Emerging Markets: Is Leapfrogging Possible?
By Stijn Claessens, Thomas Glaessner, ...
-
Contagion, Bank Lending Spreads, and Output Fluctuations
By Pierre-richard Agenor, Joshua Aizenman, ...
-
Contagion, Bank Lending Spreads and Output Fluctuations
By Pierre-richard Agenor, Joshua Aizenman, ...
-
The Role of Factoring for Financing Small and Medium Enterprises
-
Alternative Frameworks for Providing Financial Services Economic Analysis and Country Experiences
-
Electronic Security: Risk Mitigation in Financial Transactions - Public Policy Issues
By Thomas Glaessner, Tom Kellerman, ...
-
The Fed's Entry into Check Clearing Reconsidered
By Jeffrey M. Lacker, Jeffrey Walker, ...