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Global financial crisis and contagion: evidence for the Ebrici economies

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  • Krishna Reddy Chittedi*

    (Central University of Tamil Nadu, India)

Abstract

The present study examined the effects of contagion from the developed markets (The US, the UK, and Japan) to the BRIC stock markets during the period of Jan 1996 to July 2011 using daily data. It applied Dynamic Condition Correlations (DCC) model and Asymmetric Generalized Dynamic Conditional Correlation (AG-DCC) approach to capture the effects of contagion originated from developed countries. Stock market indices are observed to display a persistent and high correlation between them during and after high volatility periods. Evidence on contagion implies that diversification sought by investing in multiple markets from different regional blocks is likely to be lower when it is most desirable. As a result, an investment strategy focused solely on international diversification seems not to work in practice during turmoil periods. Since countries and financial markets react differently to sovereign shocks, stocks from different emerging economies could provide advantages over debt-only or equity-only portfolios.

Suggested Citation

  • Krishna Reddy Chittedi*, 2014. "Global financial crisis and contagion: evidence for the Ebrici economies," Journal of Developing Areas, Tennessee State University, College of Business, vol. 48(4), pages 243-264, October-D.
    • Handle: RePEc:jda:journl:vol.48:year:2014:issue4:pp:243-264
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    Cited by:

    1. Leovardo Mata Mata & José Antonio Núñez Mora & Ramona Serrano Bautista, 2021. "Multivariate Distribution in the Stock Markets of Brazil, Russia, India, and China," SAGE Open, , vol. 11(2), pages 21582440211, April.
    2. Islam, Raisul & Volkov, Vladimir, 2020. "Contagion or interdependence? Comparing signed and unsigned spillovers," Working Papers 2020-05, University of Tasmania, Tasmanian School of Business and Economics.
    3. Magnolia Miriam Sosa Castro & Christian Bucio Pacheco & Alejandra Cabello Rosales, 2018. "Contagion and Stock Interdependence in the BRIC+M Block," Economía: teoría y práctica, Universidad Autónoma Metropolitana, México, vol. 48(1), pages 173-196, Enero-Jun.
    4. Dirceu Pereira, 2018. "Financial Contagion in the BRICS Stock Markets: An empirical analysis of the Lehman Brothers Collapse and European Sovereign Debt Crisis," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 2(1), pages 1-44.
    5. Gopal K. Basak & Pranab Kumar Das & Allena Rohit, 2025. "A model of contagion without trading relations," International Economics and Economic Policy, Springer, vol. 22(1), pages 1-34, February.

    More about this item

    Keywords

    BRIC emerging markets; Global Financial Crisis and DCC and AGDCC GARCH;

    JEL classification:

    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G01 - Financial Economics - - General - - - Financial Crises
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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