Article1990

Transmission of Volatility between Stock Markets

1,588 citations0/0 files storedReview of Financial Studies

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Financial Risk and Volatility Modeling Financial Markets and Investment Strategies Market Dynamics and Volatility

Abstract

This article investigates why, in October 1987, almost all stock markets fell together despite widely differing economic circumstances. We construct a model in which “contagion” between markets occurs as a result of attempts by rational agents to infer information from price changes in other markets. This provides a channel through which a “mistake” in one market can be transmitted to other markets. We offer supporting evidence for contagion effects using two different sources of data.

Citations in this library

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References

1990Correlations in Price Changes and Volatility across International Stock Markets 1988Mean reversion in stock prices 1986Stock return variances 1976ON THE EFFICIENCY OF COMPETITIVE STOCK MARKETS WHERE TRADES HAVE DIVERSE INFORMATION

Cited by

1997Emerging equity market volatility 1999Trying to Explain Home Bias in Equities and Consumption 2002A Rational Expectations Model of Financial Contagion 2005Market Integration and Contagion 2003A New Approach to Measuring Financial Contagion 1999No Contagion, Only Interdependence: Measuring Stock Market Co-movements 2001Contagion as a Wealth Effect 2007Dynamic correlation analysis of financial contagion: Evidence from Asian markets

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