AbstractThis thesis contributes to the literature of asset comovement and crisis contagion in several aspects. First, it extends the study of contagion using an asset pricing framework to the two recent crises: the Global Financial crisis and the European debt crisis, and to a wider set of markets, including both developed and developing markets in order to compare and contrast the effects of different crises on different markets. Second, the thesis studies in detail the time-varying patterns of integration during crisis episodes. An interesting finding is that markets tend to become segmented during the latter half of a severe crisis. In other words, if a crisis is strong enough it can hamper the integration process. Such behaviours are observed in both developed and developing markets. Third, the thesis investigates the comovement and contagion of style portfolios in response to increasing interest in style investing. More specifically, it examines if portfolios sorted based on different firm characteristics exhibit different integration and contagion behaviours during different crises and finds distinct differences in the impact on integration and level of contagion from each crisis. The estimated results indicate complex integration patterns which have strong impacts on diversification. Similar to country portfolios, style portfolios also become segmented during the crises. Although contagion signals are detected, there is no clear evidence regarding which portfolios are more prone to contagion. Finally the thesis studies the behaviours of both time-varying global and regional integration patterns of each industry sector overtime and during each financial crisis and examines cross-region contagion for all the industries in the world. Empirical results provide evidence that contagion can occur in the same industry across region. Hence the result supports diversification across different industries across different regions rather than holding stocks of the same industry across regions.
|Date of Award||1 Aug 2015|
|Supervisor||Stuart Hyde (Supervisor) & Sungjun Cho (Supervisor)|
- asset comovement