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

Bartosz Gębka, Michail Karoglou

Research output: Contribution to journalArticlepeer-review

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.
Original languageEnglish
Pages (from-to)485-507
Number of pages23
JournalReview of quantitative finance and accounting
Volume40
Issue number3
Early online date25 Apr 2012
DOIs
Publication statusPublished - Apr 2013

Keywords

  • breaks in time series
  • financial contagion

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