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Testing for financial contagion: New evidence from the Greek crisis and yuan devaluation

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  • Anastasopoulos, Alexia

Abstract

This paper examines contagion effects from two recent crises. First, the effects of the Greek debt crisis on surrounding European nations, and second, the effects of the yuan devaluation on key trading partners such as the US and the BRICS countries. Kendall's tau correlation coefficient was used to measure the degree of cross-market linkages between equity returns before and during the crisis periods. To test for a significant increase in these coefficients that would indicate contagion, a test statistic developed by Li (2009) was used. Empirical results suggest both crises produced contagious effects. In addition, the results suggest that the contagion effects from the Greek debt crisis were not persistent while the effects from the yuan devaluation were. We further demonstrate that superior investment returns appear to be attainable when our contagion results are used for the management of trading risks.

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  • Anastasopoulos, Alexia, 2018. "Testing for financial contagion: New evidence from the Greek crisis and yuan devaluation," Research in International Business and Finance, Elsevier, vol. 45(C), pages 499-511.
    • Handle: RePEc:eee:riibaf:v:45:y:2018:i:c:p:499-511
    DOI: 10.1016/j.ribaf.2017.09.001
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    2. Chopra, Monika & Mehta, Chhavi, 2022. "Is the COVID-19 pandemic more contagious for the Asian stock markets? A comparison with the Asian financial, the US subprime and the Eurozone debt crisis," Journal of Asian Economics, Elsevier, vol. 79(C).
    3. Nathan Lael Joseph & Thi Thuy Anh Vo & Asma Mobarek & Sabur Mollah, 2020. "Volatility and asymmetric dependence in Central and East European stock markets," Review of Quantitative Finance and Accounting, Springer, vol. 55(4), pages 1241-1303, November.
    4. Li Liu & Yu-Min Liu & Jong-Min Kim & Rui Zhong & Guang-Qian Ren, 2020. "Analysis of Tail Dependence between Sovereign Debt Distress and Bank Non-Performing Loans," Sustainability, MDPI, vol. 12(2), pages 1-20, January.
    5. Zhang, Yi & Zhou, Long & Chen, Yajiao & Liu, Fang, 2022. "The contagion effect of jump risk across Asian stock markets during the Covid-19 pandemic," The North American Journal of Economics and Finance, Elsevier, vol. 61(C).

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    More about this item

    Keywords

    Contagion; Financial crisis; Market co-movement; Kendall's tau;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • F30 - International Economics - - International Finance - - - General

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