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Bank Stock Volatility And Contagion: An Empirical Investigation With Application Of Multivariate Garch Models

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  • WIDED BEN MOUSSA

    (Universiite Paris-Ouest Nanterre, France)

Abstract

This paper uses a multivariate GARCH modelling to describe the relationship between the systemic risk and the stock return in the banking industry in Thailand, Malaysia, Korea, Indonesia and Philippines. The banking industry comprises the large banks and the small-medium size banks. The advantage of this approach is the incorporation of time-variation in volatility consistent with empirical observations about the behaviour of stock return. Second the factor approach is adopted to incorporate intra-industry contagion within the banking sector. This so-called industry effect is designed to capture intra-industry information spillover between the large and the small-medium banks. Finally, the study provides evidence on these relations before and after the Asian financial crises of 1997, thereby implicitly testing for the impact of structural break.

Suggested Citation

  • Wided Ben Moussa, 2014. "Bank Stock Volatility And Contagion: An Empirical Investigation With Application Of Multivariate Garch Models," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 39(2), pages 1-24, June.
    • Handle: RePEc:jed:journl:v:39:y:2014:i:2:p:1-24
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    2. Tsuji, Chikashi, 2020. "Correlation and spillover effects between the US and international banking sectors: New evidence and implications for risk management," International Review of Financial Analysis, Elsevier, vol. 70(C).

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    More about this item

    Keywords

    Risk; Contagion; Bivariate-GARCH Model;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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