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Extreme Contagion in Equity Markets
Author:
Mr. James Y. Yao
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Mr. Jorge A Chan-Lau
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Mr. Donald J Mathieson
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Series:
IMF Working Papers
Volume/Issue:
Volume 2002: Issue 098
Language:
English
Publication Date:
01 May 2002
DOI:
https://doi.org/10.5089/9781451852158.001
ISBN:
9781451852158
ISSN:
1018-5941
Pages:
25
Keywords:
WP; bull market contagion; bear market contagion; transmission mechanism; Contagion; equity markets; extreme value theory; mature market; contagion pattern; market crash; Stock markets; Emerging and frontier financial markets; Stocks; Financial integration; East Asia; Global
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This study uses bivariate extremal dependence measures, based on the number of equity return co-exceedances in two markets, to quantify both negative and positive equity returns contagion in mature and emerging equity markets during the past decade. The results indicate (a) higher contagion for negative returns than for positive returns; (b) a secular increase in contagion in Latin America not matched in other regions; (c) global increases in contagion following the 1998 financial crises; and (d) that the use of simple correlations as a proxy for contagion could be misleading, as the former exhibit low correlation with extremal dependence measures of contagion.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund