Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/111725
Authors: 
Park, Sungyong
Wang, Wendun
Huang, Naijing
Year of Publication: 
2015
Series/Report no.: 
Tinbergen Institute Discussion Paper 15-040/III
Abstract: 
Regarding the asymmetric and leptokurtic behavior of financial data, we propose a new contagion test in the quantile regression framework that is robust to model misspecification. Unlike conventional correlation-based tests, the proposed quantile contagion test allows us to investigate the stock market contagion at various quantiles, not only at the mean. We show that the quantile contagion test can detect a contagion effect that is possibly ignored by correlation-based tests. A wide range of simulation studies show that the proposed test is superior to the correlation-based tests in terms of size and power. We compare our test with correlation-based tests using three real data sets: the 1994 Tequila crisis, the 1997 Asia crisis, and the 2001 Argentina crisis. Empirical results show substantial differences between two types of tests.
Subjects: 
Financial contagion
Quantile regression
One-sided score test
JEL: 
C21
C58
D53
Document Type: 
Working Paper

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