Realized correlation analysis of contagion

Vortelinos, Dimitrios I. (2016) Realized correlation analysis of contagion. The Quarterly Review of Economics and Finance, 60 . pp. 138-148. ISSN 1062-9769

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Item Type:Article
Item Status:Live Archive

Abstract

This paper investigates the cross-market contagion between spot and futures US stock markets by examining the significance and properties (textbook and lead-lag asymmetries) of realized correlation, testing the assumptions of the cost-of-carry model, as well as testing the in-sample predictive significance of heterogeneity and jumps to realized correlation. Evidence from the US stock market suggests realized correlation can be very helpful analyzing contagion. There is strong evidence of statistically significant cross-market contagion in the US stock markets, when realized correlation is used as conditional correlation, across all methods employed. To the best of my knowledge, this paper is the first to nonparametrically analyze contagion based on realized correlation.

Keywords:Contagion, Cost-of-carry, Asymmetries, Heterogeneity, Jumps, Liquidity, NotOAChecked
Subjects:N Business and Administrative studies > N300 Finance
L Social studies > L111 Financial Economics
Divisions:Lincoln International Business School
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ID Code:27921
Deposited On:11 Aug 2017 11:20

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