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Working Paper
Testing for contagion using correlations: some words of caution
Tests for contagion in financial returns using correlation analysis are seriously affected by the size of the noncrisis and crisis periods. Typically the crisis period contains relatively few observations, which seriously affects the power of the test.
Working Paper
Factor analysis of a model of stock market returns using simulation-based estimation techniques
A dynamic latent factor model of stock market returns is estimated using simulation-based techniques. Stock market volatility is decomposed into common and idiosyncratic components, and volatility decompositions are compared between stable and turmoil periods to test for possible shift-contagion in equity markets during Asian financial crisis. Five core Asian emerging stock markets are analyzedThailand, Indonesia, Korea, Malaysia and the Philippines. Results identify the existence of shift-contagion during the crisis and indicate that the Thai market was a trigger for contagious shock ...