Contagion in financial markets after September 11: myth or reality?

Hon, Mark T.; Strauss, Jack; Yong, Soo-Keong

doi:10.1111/j.1475-6803.2004.00079.x

Cited by 135 publications

(81 citation statements)

References 16 publications

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“…We obtain the data from Thomson Financial's Datastream which provides a large number of market information around the world. Forbes and Rigobon (2002), and Hon et al (2004) focus on the two-day rolling average returns in their studies to control for nonsynchronous trading periods in different markets around the world. Similarly, we compute the twoday rolling average for our turnover ratio to account for the same concern.…”

Section: Methodsmentioning

confidence: 99%

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The effect of financial crises on stock market liquidity across global markets

Kaya

Engkuchik

2017

Investment Management and Financial Innovations

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In this study, using a widely available market liquidity measure, the "turnover ratio", the authors test for market liquidity contagion during the four financial crises that occurred between 1997 and 1999: The Thai crisis, the Hong Kong crisis, the Russian crisis, and the Brazilian crisis. It is found that while the liquidity levels decreased in approximately half of the sample markets, in the remaining half, the liquidity levels actually improved. The Granger causality tests show that while there is almost no evidence of causality (in both directions) before each crisis, during each crisis, approximately half of the pairwise tests were significant. The results show that most of these causalities are reverse feedback effects from the non-crisis-origin markets to the crisis-origin market. Therefore, it is concluded that the more crucial phenomenon during these crises is the "reverse feedback effects" rather than the liquidity contagion itself.

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Section: Methodsmentioning

confidence: 99%

“…Using Forbes and Rigobon's (2002) bias-correction procedure and GARCH method, Hon et al (2004) examine whether the 9/11 incident led to contagion into other markets, i.e. the Organization for Economic Cooperation and Development (OECD) and Asian countries.…”

Section: Literature Reviewmentioning

confidence: 99%

The effect of financial crises on stock market liquidity across global markets

Kaya

Engkuchik

2017

Investment Management and Financial Innovations

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“…While limited empirical evidence investigating the contagion impacts of terrorism currently exists (see, for example Hon, Strauss and Yong, 2004;and, Mun, 2005), a substantial body of literature documents significant contagion effects following financial crises (see, for example, King and Wadwhani, 1990;and, Calvo and Reinhart, 1996), and catastrophic events (see, for example, Fields and Janjigian, 1989;and, Kalra, Henderson and Raines, 1993). These effects have been associated with capital flight towards safety assets (Johnston and Nedelescu, 2005).…”

Section: Prior Studiesmentioning

confidence: 99%

The impact of terrorism on global equity market integration

Bilson

Brailsford

Hallett³

et al. 2012

Australian Journal of Management

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In this paper we investigate the short-term contagion and long-term integration effects of terrorist activity on national stock markets. Using the partially-integrated model of Bekaert, Harvey and Ng (2005), we examine whether changes in cross-border relationships surrounding recent terrorist events are caused by changes in exposure to common risk factors and investigate whether these findings are similar across both developed and emerging market securities. Our research concludes that terrorism induces substantial contagion and market integration effects on national equity markets. Specifically, we provide strong evidence that major terrorist attacks induce substantial contagion consequences, particularly for developed nation equity markets. In terms of longer-term integration effects, a strong increase in cross-market correlation is observed from the pre to post-9/11 period. However, we find little evidence of an increase in the risk exposures of national markets to common risk factors, suggesting that this heightened correlation is driven by an increase in global risk factor uncertainty. This finding is consistent with the argument that an increase in the risk-aversion of market participants is associated with terrorist attacks. JEL Codes: F37, G15

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“…However, none analyze volatility transmission patterns and how they have been affected by the event. As far as we know, the only papers that analyze changes in interrelations between stock markets are Hon et al (2004) and Mun (2005), but they test whether the terrorist attack resulted in a change in correlation across global financial markets. We try to answer the following question: Were there differences in the reaction of the US and Eurozone stock markets to the different terrorist attacks considered?…”

Section: Introductionmentioning

confidence: 99%

Volatility transmission patterns and terrorist attacks

Chuliá

Diranzo

Soriano

et al. 2009

Quantitative Finance

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The objective of this study is to analyze volatility transmission between the US and Eurozone stock markets considering the financial market responses to the September 11, March 11 and July 7 terrorist attacks. In order to do this, we use a multivariate GARCH model and take into account the asymmetric volatility phenomenon, the non-synchronous trading problem and the turmoil periods themselves. Moreover, a graphical analysis of the Asymmetric Volatility Impulse-Response Functions (AVIRF) is introduced, which takes into consideration the financial market responses to the terrorist attacks. Results suggest that there is bidirectional and asymmetric volatility transmission and show the different impact that terrorist attacks had on both markets. JEL Classification: C32; F30; G15

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Contagion in financial markets after September 11: myth or reality?

Cited by 135 publications

References 16 publications

The effect of financial crises on stock market liquidity across global markets

The effect of financial crises on stock market liquidity across global markets

The impact of terrorism on global equity market integration

Volatility transmission patterns and terrorist attacks

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