Extreme Contagion in Equity Markets

Author/Editor:

James Y. Yao ; Jorge A Chan-Lau ; Donald J Mathieson

Publication Date:

May 1, 2002

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 02/98

Subject:

English

Publication Date:

May 1, 2002

ISBN/ISSN:

9781451852158/1018-5941

Stock No:

WPIEA0982002

Format:

Paper

Pages:

25

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