Asymmetric Quantitative Model of Coexceedances and its Applications to the Study of Contagion Mechanism of the Financial Crisis

Xiaorong Yang; Jie Chen; Chun He

doi:10.20965/jaciii.2015.p0389

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JACIII Vol.19 No.3 pp. 389-396

doi: 10.20965/jaciii.2015.p0389

(2015)

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Asymmetric Quantitative Model of Coexceedances and its Applications to the Study of Contagion Mechanism of the Financial Crisis

Xiaorong Yang, Jie Chen, and Chun He

College of Statistics & Mathematics, Zhejiang Gongshang University
Hangzhou 310018, China

Received:

December 31, 2013

Accepted:

February 23, 2015

Published:

May 20, 2015

Keywords:

asymmetric coexceedances, quantile regression, financial crisis contagion, securities market

Abstract

In this article, the linkage among the securities markets in returns, named “coexceedances,” is characterized by a new model. Considering that the positive and negative short-term liquidity shocks may cause very different influences on financial markets, the proposed model involves the asymmetric quantitative effects. Suitable explanatory variables are selected into our model after a fully consideration of factors which have potential effects on “coexceedances,” then the quantile technique is employed to estimate parameters. As an application, the asymmetric quantitative model of coexceedance is used to describe the contagion mechanism of the financial crisis. In the empirical study, we take some Asian markets as examples for analysis, and we find that during the financial crisis period, there are varied contagion effects among markets; and furthermore, other factors’ effects on “coexceedances” remarkably varied in each quantile. Our research may provide a reference for both the portfolio investors and the policy makers to forecast the risk and take the response to the financial crisis.

Cite this article as:

X. Yang, J. Chen, and C. He, “Asymmetric Quantitative Model of Coexceedances and its Applications to the Study of Contagion Mechanism of the Financial Crisis,” J. Adv. Comput. Intell. Intell. Inform., Vol.19 No.3, pp. 389-396, 2015.

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References

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This article is published under a Creative Commons Attribution-NoDerivatives 4.0 Internationa License.

[1] [1] B. T. Ewing and M. A. Thompson, “Dynamic cyclical comovements of oil prices with industrial production, consumer prices, unemployment, and stock prices,” Energy Policy, Vol.35, No.11, pp. 5535-5540, 2007.

[2] [2] J. Kallberg and P. Pasquariello, “Time-series and cross-sectional excess comovement in stock indexes,” J. of Empirical Finance, Vol.15, No.3, pp. 481-502, 2008.

[3] [3] M. King, E. Sentana and S. Wadhwani, “Volatiltiy and links between national stock markets,” National Bureau of Economic Research, 1990.

[4] [4] S. G. Calvo, and C. M. Reinhart, “Capital flows to Latin America: is there evidence of contagion effects?” World Bank Policy Research Working Paper, 1996.

[5] [5] G. L. Kaminsky and C. M. Reinhart, “On crises, contagion, and confusion,” J. of Int. Economics, Vol.51, No.1, pp. 145-168, 2000.

[6] [6] T. Baig and I. Goldfajn, “Financial market contagion in the Asian crisis,” IMF Working Paper, 1998.

[7] [7] Y. Hamao, R. W. Masulis and V. Ng, “Correlations in price changes and volatility across international stock markets,” Review of Financial Studies, Vol.3, No.2, pp. 281-307, 1990.

[8] [8] G. Bekaert, C. R. Harvey and C. Lundblad, “Does financial liberalization spur growth?” J. of Financial Economics, Vol.77, No.1, pp. 3-55, 2005.

[9] [9] P. A. Cashin and R. Sahay, “Internal migration, center-state grants and economic growth in the states of India,” MF Working Paper, 1995.

[10] [10] K. H. Bae, G. A. Karolyi, and R. M. Stulz, “A new approach to measuring financial contagion,” Review of Financial Studies, Vol.16, No.5, pp. 717-763, 2003.

[11] [11] D. G. Baur and N. Schulze, “Coexceedances in Financial Markets – A Quantile Regression Analysis of Contagion,” Emerging Markets Review, Vol6, No.1, pp. 21-43, 2005.

[12] [12] D. A. Dickey and G. Gonzalez-Farias, “A new maximum likelihood approach to testing for unit roots,” Proc. of the Business and Economic Statistics Section, American Statistical Association, 1992.

[13] [13] R. Koenker and G. Bassett Jr., “Regression quantiles,” Econometrica: J. of the Econometric Society, pp. 33-50, 1978.

[14] [14] R. Koenker, “Quantile regression,” Cambridge University Press, 2005.