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Measuring Financial Market Contagion Using Dually-Traded Stocks of Asian Firms

Author

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  • Iwatsubo, Kentaro
  • 岩壷, 健太郎
  • イワツボ, ケンタロウ
  • Inagaki, Kazuyuki
  • 稲垣, 一之
  • イナガキ, カズユキ

Abstract

This paper investigates stock market contagion between U.S. and Asian markets. To distinguish between contagion and fundamentals-based stock price comovement, we use NYSE-traded stocks issued by Asian firms. Among the results, first we find that the empirical results show significant bilateral contagion effects in returns and return volatility. Second, contagion effects from U.S. market to Asian markets are stronger than in the reverse direction, indicating that the U.S. market plays a major role in the transmission of information to foreign markets. Third, the intensity of contagion was significantly greater during the Asian financial crisis than after the crisis.

Suggested Citation

  • Iwatsubo, Kentaro & 岩壷, 健太郎 & イワツボ, ケンタロウ & Inagaki, Kazuyuki & 稲垣, 一之 & イナガキ, カズユキ, 2006. "Measuring Financial Market Contagion Using Dually-Traded Stocks of Asian Firms," CEI Working Paper Series 2006-14, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:hitcei:2006-14
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    Cited by:

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    2. Mohamed el hédi Arouri & Fredj Jawadi, 2011. "Do on/off time series models reproduce emerging stock market comovements?," Economics Bulletin, AccessEcon, vol. 31(1), pages 960-968.
    3. Hemche, Omar & Jawadi, Fredj & Maliki, Samir B. & Cheffou, Abdoulkarim Idi, 2016. "On the study of contagion in the context of the subprime crisis: A dynamic conditional correlation–multivariate GARCH approach," Economic Modelling, Elsevier, vol. 52(PA), pages 292-299.
    4. Faten Ben Slimane & Mohamed Mehanaoui & Irfan A. Kazi, 2014. "Interdependency and Spillover during the Financial Crisis of 2007 to 2009 – Evidence from High Frequency Intraday Data," Working Papers 2014-126, Department of Research, Ipag Business School.
    5. Hsu, Ching-Chi & Chien, FengSheng, 2022. "The study of co-movement risk in the context of the Belt and Road Initiative," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 1130-1152.
    6. Luke Lin & Wen-Yuan Lin, 2018. "Does the major market influence transfer? Alternative effect on Asian stock markets," Review of Quantitative Finance and Accounting, Springer, vol. 50(4), pages 1169-1200, May.
    7. Lee, Chien-Chiang & Chang, Chi-Hung & Chen, Mei-Ping, 2015. "Industry co-movements of American depository receipts: Evidences from the copula approaches," Economic Modelling, Elsevier, vol. 46(C), pages 301-314.
    8. Alhaj-Yaseen, Yaseen S. & Lam, Eddery & Barkoulas, John T., 2014. "Price discovery for cross-listed firms with foreign IPOs," International Review of Financial Analysis, Elsevier, vol. 31(C), pages 80-87.
    9. Morales, Lucía & Andreosso-O’Callaghan, Bernadette, 2012. "The current global financial crisis: Do Asian stock markets show contagion or interdependence effects?," Journal of Asian Economics, Elsevier, vol. 23(6), pages 616-626.
    10. Wang, Ming-Chieh, 2013. "Is there a reversal in the price discovery process under different market conditions? Evidence from Korean ADRs and their underlying foreign securities," Pacific-Basin Finance Journal, Elsevier, vol. 21(1), pages 1160-1174.

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    More about this item

    Keywords

    Asian financial crisis; ADRs; EGARCH; Contagion;
    All these keywords.

    JEL classification:

    • F37 - International Economics - - International Finance - - - International Finance Forecasting and Simulation: Models and Applications
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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