Yiu, M.S., Ho, W.-Y.A. & Choi, D.F.S. (2010). Dynamic correlation analysis of financial contagion in Asian markets in global financial turmoil. Applied Financial Economics, 20(4), 345-354.
Permanent Research Commons link: http://hdl.handle.net/10289/3987
This article investigates the dynamics of correlation between 11 Asian stock markets and the US stock market. By utilizing the method of 'principal components', we identify a single latent factor that can explain a major portion of variation in the weekly returns of these 11 markets from 1993 to early 2009. We employ the asymmetric Dynamic Conditional Correlation (DCC) model to estimate the correlation between this Asian factor and the US stock market. We find that there is a mean shift in the estimated DCC in the period from late of 2007. We refer this finding as contagion from the US to the Asian markets. However, we find no such evidence of having contagion between the US and individual markets in Asia during the Asian financial crisis.
Taylor and Francis
- Management Papers