Asset Markets Contagion During the Global Financial Crisis

Kenourgios, Dimitris; Dimitriou, Dimitrios; Christopoulos, Apostolos

Volume 17, Numbers 1 & 2 / March/June , Pages 1-148

Multinational Finance Journal, 2013, vol. 17, no. 1/2, pp. 49-76

Dimitris Kenourgios , University of Athens, Greece Corresponding Author

Dimitrios Dimitriou , University of Athens, Greece
Apostolos Christopoulos , University of Athens, Greece

Abstract:
This study investigates the contagion effects of the 2007-2009 global financial crisis across multiple asset markets and different regions. It uses daily return data of six asset classes: stocks, bonds, commodities, shipping, foreign exchange and real estate. A robust analysis of financial contagion is provided by estimating and comparing asymmetric conditional correlations among asset markets during stable and turmoil periods. Results provide evidence on the existence of a correlated-information channel as a contagion mechanism among the US stocks, real estate, commodities and emerging Brazilian bond index. The findings also support the decoupling of BRIC equity markets from the crisis, the diversification benefits of shipping and foreign exchange value of the US dollar indices, and the existence of a flight to quality mechanism from risky US assets to German bonds. This evidence has important implications for portfolio diversification strategies and the future work of policymakers.

Keywords : global financial crisis; asset markets; contagion; asymmetric dynamic conditional correlations
View in Bib TeX Format View Cite Format 1 View Cite Format 2