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Hanken School of Economics Working Papers, Hanken School of Economics

No 537:
Cobreaking of Stock Prices and Contagion

Niklas Ahlgren () and Jan Antell ()

Abstract: Financial crises have shown that dramatic movements in one financial market can have a powerful impact on other markets. The paper proposes to use cobreaking to model comovements between financial markets during crises and to test for conta-gion. It finds evidence of cobreaking between stock returns in developed markets. Finding cobreaking has implications for the diversification of international investments. For emerging mar-ket stock returns the evidence of cobreaking is mainly due to the non-financial event of the 9/11 terrorist attacks in 2001. Fi-nancial crises originating in one emerging market do not spread to other markets, i.e., no contagion.

Keywords: cobreaking; contagion; international financial markets; (follow links to similar papers)

20 pages, July 4, 2008

This paper is published as: Ahlgren, Niklas and Antell, Jan (2010): 'Stock Market Linkages and Financial Contagion', Quarterly Review of Economics and Finance, 50, 157-166.

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