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Market linkage and information spillover: Evidence from pre-crisis, crisis, and recovery periods

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  • Ding, Liang
  • Pu, Xiaoling

Abstract

We examine market linkage and information spillover across the U.S. stock, corporate bond, and credit derivatives markets in the pre-crisis, crisis, and recovery periods. Our results suggest that information spills over across markets in a timely manner. We find that the market linkage becomes stronger in the crisis period, which could be explained by the increasing volatility and deteriorating funding liquidity. In particular, volatility plays a dominant role in the information transmission, which absorbs the liquidity effect when both volatility and liquidity are included as exogenous factors in a vector autoregressive model.

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  • Ding, Liang & Pu, Xiaoling, 2012. "Market linkage and information spillover: Evidence from pre-crisis, crisis, and recovery periods," Journal of Economics and Business, Elsevier, vol. 64(2), pages 145-159.
    • Handle: RePEc:eee:jebusi:v:64:y:2012:i:2:p:145-159
    DOI: 10.1016/j.jeconbus.2011.11.001
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    7. Lixiong Shi, 2016. "Research of coupling effects between the offshore RMB exchange rate and onshore exchange rate," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 6(8), pages 201-209, August.
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    More about this item

    Keywords

    Market linkage; Information spillover; Volatility; Liquidity;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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