Flavin, Thomas and Panopoulou, Ekaterini
Detecting shift and pure contagion in East Asian equity markets: A Unified Approach.
Department of Economics, Finance and Accounting, National University of Ireland Maynooth.
We test for contagion between pairs of East Asian equity markets over the period 1990-2007. We develop an econometric methodology that allows us to test for both "shift" and "pure" contagion within a unified framework. Using both Hong Kong and Thailand as potential shock sources, we find strong evidence of both types of contagion. Therefore during episodes of high-volatility, equity returns are influenced by changes in the transmission of common shocks and additionally by the diffusion of idiosyncratic shocks through linkages which do not exist during normal times.
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