Market Integration and Contagion
Top Cited Papers
- 1 January 2005
- journal article
- Published by University of Chicago Press in The Journal of Business
- Vol. 78 (1) , 39-69
- https://doi.org/10.1086/426519
Abstract
Contagion is usually defined as correlation between markets in excess of that implied by economic fundamentals; however, there is considerable disagreement regarding the definition of the fundamentals, how they might differ across countries, and the mechanisms that link them to asset returns. Our research starts with a two-factor model with time-varying betas that accommodates various degrees of market integration. We apply this model to stock returns in three different regions: Europe, Southeast Asia, and Latin America. In addition to examining contagion during crisis periods, we document time variation in world and regional market integration and measure the proportion of volatility driven by global, regional, and local factorsKeywords
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