The contagion of financial crises surrounding the markets around the world has been in the forefront of academic and public discussions. In this paper, we attempt to study the “contagion effect” of the stock market crises around the world by studying the correlations of global stock returns and volatility. We analyze the daily returns of major stock indexes around the world to discover the timing and path of the transmission of shocks that manifest themselves in stock market returns. We construct VARs of major stock market index returns and volatilities. Our work differs from the literature in analyzing spillover effects between emerging markets and other major stock markets.
Cite this paper
H. Kazemi and A. Ogus, "Was There a Contagion during the Asian Crises?," Applied Mathematics, Vol. 4 No. 1, 2013, pp. 29-39. doi: 10.4236/am.2013.41007.
 K. Forbes and R. Rigobon, “No Contagion, Only Interdependence: Measuring Stock Market Co-Movements,” Journal of Finance, Vol. 57, No. 5, 2000, pp. 2223-2261.
 P. Bennett and J. Kelleher, “The International Transmission of Stock Price Disruption in October 1987,” Federal Reserve Bank of NY Q. Review, Vol. 13, No. 2, 1988, pp. 17-33.
 M. King, E. Sentana and S. Wadhwani, “Volatility and Links between National Stock Markets,” Econometrica, Vol. 62, No. 4, 1994, pp. 901-934.
 E. Kaplanis, “Stability and Forecasting of the Co-Movement Measures of International Stock Market Return,” Journal of International Money & Finance, Vol. 7, No. 1, 1988, pp. 63-75. doi:10.1016/0261-5606(88)90006-X
 L. Ramchand and R. Susmel, “Volatility and Cross Cor-Relation across Major Stock Markets,” Journal of Empirical Finance, Vol. 5, No. 4, 1998, pp. 397-416.
 M. King and S. Wadhwani, “Transmission of Volatility between Stock Markets,” Review of Financial Studies, Vol. 3, No. 1, 1990, pp. 5-33. doi:10.1093/rfs/3.1.5
 E. Bertero and C. Mayer, “Structure and Performance: Global Interdependence of Stock Markets around the Crash of October 1987,” Center for Economic Policy Research, Discussion Paper, No. 307, 1989.
 P. D. Koch and T. W. Koch, “Evolution in Dynamic Linkages across National Stock Indexes,” Journal of International Money & Finance, Vol. 10, No. 2, 1990, pp. 231-251. doi:10.1016/0261-5606(91)90037-K
 F. Longin and B. Solnik, “Is the Correlation in International Equity Returns Constant: 1960-1990?” Journal of International Money & Finance, Vol. 14, No. 1, 1995, pp. 3-23. doi:10.1016/0261-5606(94)00001-H
 D. Zhumabekova and D. Dungey, “Factor Analysis of a Model of Stock Market Returns Using Simulation-Based Estimation Techniques,” Pacific Basin Working Paper Series 01-08, Federal Reserve Bank of San Francisco, San Francisco, 2001.
 K. Hou and T. Moskowitz, “Market Frictions, Price Delay, and the Cross-Section of Expected Returns,” Review of Financial Studies, Vol. 18, No. 3, 2005, pp. 981-1020.