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Dynamic analysis of financial market contagion

금융시장 전염 동적 검정

  • Received : 2015.12.07
  • Accepted : 2015.12.15
  • Published : 2016.02.29

Abstract

We propose methodology to analyze the dynamic mechanisms of financial market contagion under market integration using a biological contagion analytical approach. We employ U-statistic to measure market integration, and a dynamic model based on an error correction mechanism (single equation error correction model) and latent factor model to examine market contagion. We also use quantile regression and Wald-Wolfowitz runs test to test market contagion. This methodology is designed to effectively handle heteroscedasticity and correlated errors. Our simulation results show that the single equation error correction model fits well with the linear regression model with a stationary predictor and correlated errors.

Keywords

financial market contagion;interdependence;single equation error correction model;U-statistic

References

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Acknowledgement

Supported by : 서울대학교 경영대학 증권 금융연구소 투자연구교육센터