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Contagion And Portfolio Shift In Emerging Countries´ Sovereign Bonds

Author

Listed:
  • Alicia Garcia Herrero

    (Banco de España)

  • Antonio Diez de los Rios

    (CEMFI)

Abstract

The paper tests whether there were events of contagion, and portfolio shift, in the sovereign bond markets of eleven emerging countries' between January 1995 and November 2001. From existing definitions, we narrow down the concept of contagion by focusing on pricing errors, after general market movements have been taken into account with a three-factor asset pricing model. We measure contagion (and portfolio shift) in terms of a causal positive (negative) dynamic co-movement between sovereign bond pricing errors. Downgrades of sovereign ratings are used as proxies for a shock. We find empirical support for contagion and portfolio shift for a number of countries on the basis of our definition.

Suggested Citation

  • Alicia Garcia Herrero & Antonio Diez de los Rios, 2004. "Contagion And Portfolio Shift In Emerging Countries´ Sovereign Bonds," International Finance 0403002, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpif:0403002
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    Cited by:

    1. Angelo Marsiglia Fasolo, 2006. "Interdependence and Contagion: an Analysis of Information Transmission in Latin America's Stock Markets," Working Papers Series 112, Central Bank of Brazil, Research Department.

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    More about this item

    Keywords

    Financial linkages; financial crisis; Granger causality; international;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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