Emerging market crises and US equity market returns

Berger, Dave; Turtle, Harry J.

doi:10.1016/j.gfj.2011.05.003

Cited by 10 publications

(3 citation statements)

References 27 publications

(28 reference statements)

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“…Kaminsky et al (2003) show capital outflows from troubled markets around several major crisis events, a phenomenon which would have caused an increase in return dispersion across countries (as found in this paper), and Favero and Giavazzi (2002) argue that herd-like flight to quality in response to crises could have raised the dispersion of interest rates in Europe. Negative correlation has been observed between stock and bond returns, being interpreted as a result of flight to quality, e.g., from risky stocks to safer bonds (Baur and Lucey, 2009), and even across stocks in the US market (e.g., from small to large stocks, as in Berger and Turtle, 2011, in response to emerging market crises) and associated with herd-like behaviour (Davis and Madura, 2012). The latter two studies demonstrate that this flight to quality was excessive, as compared to rational reactions to changes in the relevant risk factors.…”

Section: Positive Versus Negative Values Of the Herding Coefficientmentioning

confidence: 99%

International herding: Does it differ across sectors?

Gębka

Wohar

2013

Journal of International Financial Markets, Institutions and Mo

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Section: Positive Versus Negative Values Of the Herding Coefficientmentioning

confidence: 99%

International herding: Does it differ across sectors?

Gębka

Wohar

2013

Journal of International Financial Markets, Institutions and Mo

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“…Gębka and Wohar () argue that when investors overemphasize their own view or focus on views dominant among subset of actors (who may herd jointly moving in and out of positions) excessively ignoring market information, it results in increased dispersion in returns across assets leading to adverse herding. As the possible explanation of adverse herding, Gębka and Wohar () identify localized herding, excessive “flight to quality” during market stress (Favero and Giavazzi ; Kaminsky et al ; Baur and Lucey ; Berger and Turtle ; Davis and Madura ), and overconfidence (Goodfellow et al ). When a subset of investors synchronously move into (move out of) a subset of assets, the resulting increase (decrease) of prices lead to excessive dispersion in return across assets creating localized herding.…”

Section: Empirical Designmentioning

confidence: 99%

“…However, Gębka and Wohar () argue that there might be an increased dispersion in returns across assets leading to adverse herding when investors overemphasize their own view or focus on views dominant among subset of actors excessively ignoring market information. We also explore such possibility, which might be due to localized herding (Gębka and Wohar ), excessive “flight to quality” during market stress (Favero and Giavazzi ; Kaminsky et al ; Baur and Lucey ; Berger and Turtle ; Davis and Madura ), and overconfidence (Goodfellow et al ).…”

Section: Introductionmentioning

confidence: 99%

Did Investors Herd during the Financial Crisis? Evidence from the US Financial Industry

Kabir

2017

Int Rev Finance

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We examine the herding behavior of investors in the US financial industry, especially commercial banks, S&Ls, investment and insurance firms during global financial crisis of 2008 towards own sub‐sector and market consensus using augmented cross sectional absolute deviation of returns (CSAD) model. After distinguishing between fundamental and non‐fundamental information, we find a greater influence of global financial crisis on spurious herding for commercial and investment banks, and such herding increases in the down market and with conditional volatility of returns, but adverse herding is prevalent among investors during normal period in response to fundamental information. We also find that herding intensity on fundamental information is relatively high with market consensus for all financial institutions except insurance firms in high volatility regime, and intentional herding is only significant and limited to S&Ls and investment banks in high volatility regime. Our findings suggest limited spillover effects of herding when investors face non‐fundamental information.

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Volatility Spillovers and Contagion During Major Crises: An Early Warning Approach Based on a Deep Learning Model

Sahiner

2023

Comput Econ

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This paper contributes to the ongoing debate on the nature and characteristics of the volatility transmission channels of major crash events in international stock markets between 03 July 1997 and 09 March 2021. Using dynamic conditional correlations (DCC) for conditional correlations and volatility clustering, GARCH-BEKK for the direction of transmission of disturbances, and the Diebold-Yilmaz spillover index for the level of volatility contagion, the paper finds that the climbs in external shock transmissions have long-lasting impacts in domestic markets due to the contagion effect during crisis periods. The findings also reveal that the heavier magnitude of financial stress is transmitted between Asian countries via the Hong Kong stock market. Additionally, the degree of volatility spillovers between advanced and emerging equity markets is smaller compared to the pure spillovers between advanced markets or emerging markets, offering a window of opportunity for international market participants in terms of portfolio diversification and risk management applications. Furthermore, the study introduces a novel early warning system created by integrating DCC correlations with a state-of-the-art deep learning model to predict the global financial crisis and COVID-19 crisis. The experimental analysis of long short-term memory network finds evidence of contagion risk by verifying bursts in volatility spillovers and generating signals with high accuracy before the 12-month crisis period. This provides supplementary information that contributes to the decision-making process of practitioners, as well as offering indicative evidence that facilitates the assessment of market vulnerability for policymakers.

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Emerging market crises and US equity market returns

Cited by 10 publications

References 27 publications

International herding: Does it differ across sectors?

International herding: Does it differ across sectors?

Did Investors Herd during the Financial Crisis? Evidence from the US Financial Industry

Volatility Spillovers and Contagion During Major Crises: An Early Warning Approach Based on a Deep Learning Model

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