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Measuring financial contagion in the stock markets using a copula approach

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  • Selma Jayech
  • Naceur Ben Zina

Abstract

The US financial crisis has underlined the fact that markets tend to be more dependent during the crisis than they are during the pre-crisis periods. This situation is usually referred to as contagion, a notion which has recently attracted the attention of several researchers working on finance due to its dramatic effects. Indeed, in our study, we use the copula theory to analyse the financial contagion between stock markets of four developed countries (USA, UK, France and Germany). The market indexes used are S%P 500 (USA), FTSE 100 (UK), CAC 40 (France) and DAX 30 (Germany) covering the period from 1 January 2004 to 27 August 2010. This paper finds evidence of a changing dependence during the turmoil periods. Hence, the existence of financial contagion.

Suggested Citation

  • Selma Jayech & Naceur Ben Zina, 2012. "Measuring financial contagion in the stock markets using a copula approach," International Journal of Data Analysis Techniques and Strategies, Inderscience Enterprises Ltd, vol. 4(2), pages 154-180.
    • Handle: RePEc:ids:injdan:v:4:y:2012:i:2:p:154-180
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    Citations

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    Cited by:

    1. Manolis Maragoudakis & Dimitrios Serpanos, 2016. "Exploiting Financial News and Social Media Opinions for Stock Market Analysis using MCMC Bayesian Inference," Computational Economics, Springer;Society for Computational Economics, vol. 47(4), pages 589-622, April.
    2. Jayech, Selma, 2016. "The contagion channels of July–August-2011 stock market crash: A DAG-copula based approach," European Journal of Operational Research, Elsevier, vol. 249(2), pages 631-646.
    3. Boubaker, Heni & Raza, Syed Ali, 2016. "On the dynamic dependence and asymmetric co-movement between the US and Central and Eastern European transition markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 459(C), pages 9-23.

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