Title: Measuring financial contagion in the stock markets using a copula approach

Authors: Selma Jayech; Naceur Ben Zina

Addresses: Faculty of Economics and Management Sfax, Unit of Dynamic and Environmental Research, (URDEE), Km 1.5 Sfax 3018, Tunisia. ' Faculty of Economics and Management Sfax, Unit of Dynamic and Environmental Research, (URDEE), Km 1.5 Sfax 3018, Tunisia

Abstract: The US financial crisis has underlined the fact that markets tend to be more dependent during the crisis than they are during the pre-crisis periods. This situation is usually referred to as contagion, a notion which has recently attracted the attention of several researchers working on finance due to its dramatic effects. Indeed, in our study, we use the copula theory to analyse the financial contagion between stock markets of four developed countries (USA, UK, France and Germany). The market indexes used are S&P 500 (USA), FTSE 100 (UK), CAC 40 (France) and DAX 30 (Germany) covering the period from 1 January 2004 to 27 August 2010. This paper finds evidence of a changing dependence during the turmoil periods. Hence, the existence of financial contagion.

Keywords: financial contagion; copulas; Spearman; rho; Kendall; tau; lower tail; upper tail; USA; United States; United Kingdom; UK; France; Germany; stock markets; financial crisis; copula theory.

DOI: 10.1504/IJDATS.2012.046790

International Journal of Data Analysis Techniques and Strategies, 2012 Vol.4 No.2, pp.154 - 180

Published online: 06 Sep 2014 *

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