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Financial contagion: A local correlation analysis

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  • Inci, A. Can
  • Li, H.C.
  • McCarthy, Joseph

Abstract

Local correlation is used to examine financial contagion. We share the view of previous research that there is contagion from the U.S. spot equity market to that of Germany and Britain. In addition, we provide evidence to suggest contagion from the U.S. spot equity market to that of Japan and Hong Kong. Furthermore, we have detected contagion from U.S. futures to other futures markets. However, there is no reverse contagion from any of the German, British, Japanese, and Hong Kong spot or index futures markets to those of the U.S. The results have international diversification, portfolio management, and within-industry implications.

Suggested Citation

  • Inci, A. Can & Li, H.C. & McCarthy, Joseph, 2011. "Financial contagion: A local correlation analysis," Research in International Business and Finance, Elsevier, vol. 25(1), pages 11-25, January.
    • Handle: RePEc:eee:riibaf:v:25:y:2011:i:1:p:11-25
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    References listed on IDEAS

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