Global capital market interdependence and spillover effect of credit risk: Evidence from the 2007-2009 global financial crisis

William Cheung*, Scott Fung, Shih Chuan Tsai

*此作品的通信作者

研究成果: 雜誌貢獻期刊論文同行評審

61 引文 斯高帕斯(Scopus)

摘要

This article examines the impact of the 2007-2009 Global Financial Crisis on the interrelationships among global stock markets and the informational role of the TED spread as perceived credit risk. The current crisis originated from the dominant US market has a prompt and pervasive spillover effect into other global markets. Using the Vector Autoregressive (VAR) model, Granger causality test, cointegrating Vector Error Correction Model (VECM), we document enhanced leadership of the US market with respect to UK, Hong Kong, Japan, Australia, Russia and China markets during the crisis. Consistent with the contagion theory, the interdependence among international stock markets becomes stronger in the crisis. The TED spread serves as a leading 'fear' indicator and adjusts to new information rapidly during the crisis. While the impact of orthogonalized shocks from the US market on other global markets increases by at least two times during the crisis, the impact of orthogonalized shocks from the TED spread on global market indices increase by at least five times. Overall, these findings shed light on the dynamics of international stock market linkage and the spillover effect of credit risk.

原文英語
頁(從 - 到)85-103
頁數19
期刊Applied Financial Economics
20
發行號1-2
DOIs
出版狀態已發佈 - 2010 一月

ASJC Scopus subject areas

  • 金融
  • 經濟學與計量經濟學

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