(), Goran Zafirov
() and AMM Shahiduzzaman Quoreshi
Sabur Mollah: Stockholm University, School of Business
Goran Zafirov: Stockholm University, School of Business
AMM Shahiduzzaman Quoreshi: CITR, Blekinge Inst of Technology, Postal: CITR (Center for Innovation and Technology Research), Department of Industrial Economics, Blekinge Inst of Technology, 371 79 Karlskrona, Sweden
Abstract: Scholars worldwide have provided both theoretical and empirical insights into financial market contagion. The devastation from the recent financial crisis is immeasurable, and researchers commonly believe that the crisis seemingly originated from the U.S. and spread immediately to the other global financial hubs. Several studies have been conducted on financial markets, but this issue has yet to be addressed. Using U.S. dollar-denominated MSCI daily indices for the period 2006–2010, this paper employs Dynamic Conditional Correlation-Generalized Autoregressive Conditional Heteroskedasticity (DCC-GARCH) and vector error correction (VEC) models to address the multi-dimensional phenomena around financial market contagion. The empirical results demonstrate the existence of contagion in the financial markets during the global crisis. However, the crisis originated in the U.S., and its effects escalated immediately to the other global markets. The results also indicate that benefits from portfolio diversification decayed significantly among countries during the crisis.
38 pages, April 2, 2014
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