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Global capital market interdependence and spillover effect of credit risk: Evidence from the 2007-2009 global financial crisis
Cheung W.; Fung S.; Tsai S.
2010
Source PublicationApplied Financial Economics
ISSN9603107
Volume20Issue:2018-01-02Pages:85
AbstractThis 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. © 2010 Taylor & Francis.
DOI10.1080/09603100903262962
URLView the original
Language英语
The Source to ArticleScopus
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Document TypeJournal article
CollectionUniversity of Macau
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GB/T 7714
Cheung W.,Fung S.,Tsai S.. Global capital market interdependence and spillover effect of credit risk: Evidence from the 2007-2009 global financial crisis[J]. Applied Financial Economics,2010,20(2018-01-02):85.
APA Cheung W.,Fung S.,&Tsai S..(2010).Global capital market interdependence and spillover effect of credit risk: Evidence from the 2007-2009 global financial crisis.Applied Financial Economics,20(2018-01-02),85.
MLA Cheung W.,et al."Global capital market interdependence and spillover effect of credit risk: Evidence from the 2007-2009 global financial crisis".Applied Financial Economics 20.2018-01-02(2010):85.
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