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Contagion in the East Asian Stock Markets - Evidence from the 2007-2010 Financial Crisis

Authors
Publisher
Lunds universitet/Företagsekonomiska institutionen
Publication Date
Keywords
  • Investors
  • Management Of Enterprises
  • Financial Crisis
  • Fiml
  • Contagion
  • East Asia
  • Företagsledning
  • Management
  • Business And Economics
Disciplines
  • Economics

Abstract

This thesis investigates the possible contagion effects between the US and East Asian markets during the recent financial crisis of 2007-2010. We focus on the developing stock markets of Malaysia, Thailand, South Korea, Philippines, China and Indonesia. The applied approach is based on the relatively new method advanced by Pesaran and Pick (2007) and extended by Masacci (2007) using a Full Information Maximum Likelihood (FIML). The results suggest that the transmission of shocks across the markets included in our sample cannot only be attributed to real economic linkages and there are also contagion effects present. Moreover our comparative analysis of contagion coefficients across the Asian countries suggests that the magnitude of drop in stock market indices differs and it might be contributed to diverse capital control levels and different involvement of foreign investors in the market.

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