Analysis of Contagion in Financial Markets Based on the Gradient Measurement of the Growth in Financial Markets and Conditional Copula Functions

20 Pages Posted: 18 Dec 2013

See all articles by Rafał Siedlecki

Rafał Siedlecki

Uniwersytet Ekonomiczny we Wrocławiu

Daniel Papla

Uniwersytet Ekonomiczny we Wrocławiu

Date Written: December 16, 2013

Abstract

We define contagion in financial markets as a significant increase in cross-market linkages after a shock to one country (or group of countries). Contagion occurs if cross-market co-movement increases significantly after the shock.

The main goal of this paper is to analyse changes in dependence between a chosen world stock market and the constructed synthetic index. Subsequently the research hypothesis will be verified: dependence between the synthetic stock market index and other stock markets is increasing in periods of a rapid decrease in value of stock market indexes. Positive verification of this hypothesis means that there is a contagion in financial markets.

Keywords: contagion in financial markets, synthetic measurement, conditional copula functions

JEL Classification: C43, C58, G100

Suggested Citation

Siedlecki, Rafał and Papla, Daniel, Analysis of Contagion in Financial Markets Based on the Gradient Measurement of the Growth in Financial Markets and Conditional Copula Functions (December 16, 2013). Available at SSRN: https://ssrn.com/abstract=2368456 or http://dx.doi.org/10.2139/ssrn.2368456

Rafał Siedlecki

Uniwersytet Ekonomiczny we Wrocławiu ( email )

Komandorska 118/120
Wroclaw, 53-345
Poland

Daniel Papla (Contact Author)

Uniwersytet Ekonomiczny we Wrocławiu ( email )

Komandorska 118/120
Wroclaw, 53-345
Poland

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