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Systematic Contagion Effects of the Global Finance Crisis: Evidence from the World’s Largest Advanced and Emerging Equity Markets

Author

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  • Dinesh Gajurel

    (Faculty of Management, University of New Brunswick, Fredericton, NB E3B 5A3, Canada)

  • Mardi Dungey

    (Tasmanian School of Business and Economics, University of Tasmania, Hobart, TAS 7005, Australia
    We dedicate this paper in memory of our co-author Mardi Dungey, who passed away unexpectedly in January 2019. With her we have lost not only a great researcher with unique expertise in economics and finance, but also an inspiring mentor, colleague and great friend. Earlier version of the paper was titled “Identifying Contagion Using a Conditional Factor Model”. Dinesh Gajurel acknowledges research support from the Faculty of Management, the University of New Brunswick.)

Abstract

This paper examines the systematic contagion effects of the global financial crisis of 2007–2009 on the world’s largest advanced and emerging equity markets, using the conditional factor model of Dungey and Renault (2018) and and the adjusted correlation coefficient approach of Forbes and Rigobon (2002). Our findings indicate that when applying the Forbes and Rigobon approach, no evidence of contagion is found, while using the conditional factor model, we observe significant evidence of contagion in the aggregate equity markets of both advanced and emerging markets. Furthermore, the results from the conditional factor model suggest that the structural relationship across the financial sectors of advanced and emerging markets was significantly disrupted during the crisis period.

Suggested Citation

  • Dinesh Gajurel & Mardi Dungey, 2023. "Systematic Contagion Effects of the Global Finance Crisis: Evidence from the World’s Largest Advanced and Emerging Equity Markets," JRFM, MDPI, vol. 16(3), pages 1-20, March.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:3:p:182-:d:1091262
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