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Is there life in the old dogs yet? Making break-tests work on financial contagion

Lookup NU author(s): Professor Bartosz GebkaORCiD

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Abstract

Many tests of financial contagion require a definition of the dates separating calm from crisis periods. We propose to use a battery of break search procedures for individual time series to objectively identify potential break dates in relationships between countries. Applied to the biggest European stock markets and combined with two well established tests for financial contagion, this approach results in break dates which correctly identify the timing of changes in cross-country transmission mechanisms. Application of break search procedures breathes new life into the established contagion tests, allowing for an objective, data-driven timing of crisis periods.

Publication metadata

Author(s): Gebka B, Karoglou M

Publication type: Article

Publication status: Published

Journal: Review of Quantitative Finance and Accounting

Year: 2013

Volume: 40

Issue: 3

Pages: 485-507

Print publication date: 25/04/2012

ISSN (print): 0924-865X

ISSN (electronic): 1573-7179

Publisher: Springer

URL: http://dx.doi.org/10.1007/s11156-012-0278-z

DOI: 10.1007/s11156-012-0278-z

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