Abstract
The Russian crash in August 1998 was followed by several stock market and currency collapses around the world. It was, as Yogi Berrà would say, “déjà vu all over again”. During the Mexican and the Asian crises the markets behaved similarly. In general, these events have been called “contagion”. However, there does not seem to be an agreement on what exactly contagion means.
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Notes
King, Mervyn and Sushil Wadhwani. “Transmission of Volatility between Stock Markets.” Review of Financial Studies, pp. 5–33, 1990.
Forbes, Kristin and Roberto Rigobon. “Not Contagion, Only Interdependence: Measuring Stock Market Comovements.” MIT Mimeo, 1998.
This result is known as the Normal Correlation Theorem. The first one to highlight this result (as far as I know) was Rob Stambaugh in a discussion of the paper: Karolyi, Andrew and Rene Stulz. “Why do Market Move Together? An Investigation of US-Japan Stock Return Comovements.” The Journal of Finance, pp. 951–986, 1996.
Rigobon, Roberto. “On the Measurement of the International Propogation of Shocks.” MIT Mimeo, 1999.
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Rigobon, R. (2001). Does Contagion Exist?. In: Figlewski, S., Levich, R.M. (eds) Risk Management: The State of the Art. The New York University Salomon Center Series on Financial Markets and Institutions, vol 8. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-0791-8_13
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DOI: https://doi.org/10.1007/978-1-4615-0791-8_13
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