Files and links (1)
PDFOpen Access (License Unspecified), Open Access
Dissertation
Essays on financial contagion and regime shifts
Doctor of Philosophy (Ph.D.), Drexel University
Jun 2004
DOI:
https://doi.org/10.17918/etd-303
Abstract
This study reexamines the Asian stock market contagion by employing a dynamic multivariate GARCH model. Based on a commonly held definition, contagion is defined as a significant increase in comovements between asset returns across markets. By analyzing the correlation coefficient series, this paper identifies two phases of the Asian crisis. The first phase shows an increase in correlation (contagion) and the second phase shows continued high correlation (herding). Statistical analysis of correlation coefficients shows both the level and the variance shifts, providing evidence of contagion effect and casting some doubt on the benefit of international portfolio diversifications during the crises. This study further explores the contagion effects through sovereign rating changes during the crisis, i.e. how the sovereign rating changes in one country affected its own stock markets and stock markets in other Asian crisis countries. Using the sovereign rating changes announced by Standard & Poor's during the period from 1990 to 2003, the panel estimation finds that overall, rating changes do not show strong evidence of a pro-cyclical tendency during the crisis period. However, the contagion effect was found to exist in the sense that rating changes in one country affect the stock markets in other crisis countries. During the crisis, the contagion effect was coming from the instances of upgrades; no comparable evidence has been found in the cases of downgrades. One possible explanation is the market expectations in the downside of the market. Event study further confirms the contagion effects during the crisis period. Lastly, this study contributes to the literature by studying the contagion effects from the currency markets to the stock markets. The non-linear relationship between exchange rate changes and stock returns is examined by using various specifications of Markov regime-switching models. The models endogenously distinguish two different regimes. The exchange rate exposure of the national stock returns is mainly through the real channel in tranquil period and through financial channel in volatile periods.
Metrics
38 File views/ downloads
23 Record Views
Details
- Title
- Essays on financial contagion and regime shifts
- Creators
- Huimin Li - DU
- Contributors
- Bang Nam Jeon (Advisor) - Drexel University (1970-)Thomas Chi-Nan Chiang (Advisor) - Drexel University (1970-)
- Awarding Institution
- Drexel University
- Degree Awarded
- Doctor of Philosophy (Ph.D.)
- Publisher
- Drexel University; Philadelphia, Pennsylvania
- Resource Type
- Dissertation
- Language
- English
- Academic Unit
- Bennett S. LeBow College of Business; Drexel University
- Other Identifier
- 303; 991014632832904721