Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/89109
Authors: 
Bekaert, Geert
Ehrmann, Michael
Fratzscher, Marcel
Mehl, Arnaud
Year of Publication: 
2014
Series/Report no.: 
DIW Discussion Papers 1352
Abstract: 
We analyze the transmission of the financial crisis of 2007 to 2009 to 415 country-industry equity portfolios. We use a factor model to predict crisis returns, defining unexplained increases in factor loadings and residual correlations as indicative of contagion. While we find evidence of contagion from the U.S. and the global financial sector, the effects are small. By contrast, there has been substantial contagion from domestic markets to individual domestic portfolios, with its severity inversely related to the quality of countries' economic fundamentals. This confirms the wake-up call hypothesis, with markets focusing more on country-specific characteristics during the crisis.
Subjects: 
contagion
financial crisis
equity markets
global transmission
market integration
country risk
factor model
financial policies
FX reserves
current account
JEL: 
F3
G14
G15
Document Type: 
Working Paper

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