Title: Financial contagion across G7 countries during stock market crashes

Authors: Arifenur Güngör; Mahmut Sami Güngör

Addresses: Istanbul Topkapı University, Kazlıcesme Campus, 34020, Istanbul, Turkey ' Marmara University, Goztepe Campus, 34722, Istanbul, Turkey

Abstract: Globalisation leads to rising stock market exposure to financial contagion during economic crises. Since the importance of short-run linkages between stock markets for international portfolio diversification, this study aims to investigate the existence of financial contagion across G7 stock markets throughout the stock market crashes of 2008 and 2020 using short-run time-varying conditional correlations. To do this, first, this study estimates the DCC-MIDAS model based on the GARCH-MIDAS model to decompose the short- and long-run time-varying conditional correlations among G7 stock markets. Then, it estimates the regression model for each stock market pair to examine the existence of financial contagion across G7 stock markets during the stock market crashes. The empirical findings provide new evidence of financial contagion between developed stock markets during the global crash periods. A noteworthy finding is that the results on financial contagion are mixed and differ by region and the nature of stock market crashes.

Keywords: global financial crisis; contagion; COVID-19 pandemic; stock markets; developed economies.

DOI: 10.1504/GBER.2025.146502

Global Business and Economics Review, 2025 Vol.32 No.4, pp.464 - 488

Received: 25 Aug 2023
Accepted: 05 Dec 2023
Published online: 02 Jun 2025 *

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