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When the US sneezes the world catches cold: are worldwide stock markets stable?

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  • Sandy Suardi

Abstract

There is a widespread belief that the US subprime mortgage crisis has escalated into a full-blown current global financial crisis and that many economies throughout the world have been hit by it. Using a test of financial market stability, this article shows the varying degree of impact system-wide shocks during the US subprime crisis had on developed and emerging market stock indices. There is evidence that some developed and stable markets display signs of financial fragility with systematic shocks being propagated differently during extreme and normal market conditions. In addition, the crisis increases the response of emerging market returns to systematic shocks during both tranquil and volatile regimes, albeit that the effects are more pronounced in Latin America than in Asian markets.

Suggested Citation

  • Sandy Suardi, 2012. "When the US sneezes the world catches cold: are worldwide stock markets stable?," Applied Financial Economics, Taylor & Francis Journals, vol. 22(23), pages 1961-1978, December.
    • Handle: RePEc:taf:apfiec:v:22:y:2012:i:23:p:1961-1978
    DOI: 10.1080/09603107.2012.690847
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    References listed on IDEAS

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    1. Oosterloo, Sander & de Haan, Jakob, 2004. "Central banks and financial stability: a survey," Journal of Financial Stability, Elsevier, vol. 1(2), pages 257-273, December.
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    Cited by:

    1. Amanjot Singh & Manjit Singh, 2017. "Conditional Co-Movement And Dynamic Interactions: Us And Bric Equity Markets," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 62(212), pages 85-112, January -.
    2. Awasthi, Kritika & Ahmad, Wasim & Rahman, Abdul & Phani, B.V., 2020. "When US sneezes, clichés spread: How do the commodity index funds react then?," Resources Policy, Elsevier, vol. 69(C).
    3. Azza Bejaoui & Wajdi Frikha & Ahmed Jeribi, 2023. "On the dynamic connectedness between the G7 stock market indices and different asset classes: Fresh insights from the COVID-19 pandemic and Russia–Ukraine war," SN Business & Economics, Springer, vol. 3(11), pages 1-21, November.
    4. Tiwari, Aviral Kumar & Mutascu, Mihai Ioan & Albulescu, Claudiu Tiberiu, 2016. "Continuous wavelet transform and rolling correlation of European stock markets," International Review of Economics & Finance, Elsevier, vol. 42(C), pages 237-256.
    5. Ahmad, Wasim & Sehgal, Sanjay & Bhanumurthy, N.R., 2013. "Eurozone crisis and BRIICKS stock markets: Contagion or market interdependence?," Economic Modelling, Elsevier, vol. 33(C), pages 209-225.
    6. Avishek Bhandari, 2020. "A wavelet analysis of inter-dependence, contagion and long memory among global equity markets," Papers 2003.14110, arXiv.org.
    7. Zhou, Zhongbao & Lin, Ling & Li, Shuxian, 2018. "International stock market contagion: A CEEMDAN wavelet analysis," Economic Modelling, Elsevier, vol. 72(C), pages 333-352.
    8. Wasim Ahmad & N.R. Bhanumurthy & Sanjay Sehgal, 2014. "The Eurozone crisis and its contagion effects on the European stock markets," Studies in Economics and Finance, Emerald Group Publishing Limited, vol. 31(3), pages 325-352, July.

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