If the block of emerging economies is viewed as a segmented market, we found that investors will not assess the veracity of country-specific rumors if fixed information costs exceed one- sixth of the mean portfolio return prior to the emergence of a rumor. Abstract: Prevailing models of capital markets capture a limited form of social influence and information transmission, in which the beliefs and behavior of an investor affect others only through market price, information transmission and processing than bull market contagion within market classes, across markets, and within regions. The results of research on contagion spreading from the U.S. market to European markets are presented by Burzala (2014). Shift Contagion in Asset Markets by Toni Gravelle,1 Maral Kichian,2 and James Morley3 1International Capital Markets Department International Monetary Fund Washington, D.C., U.S.A. 20431 2Research Department Bank of Canada Ottawa, Ontario, Canada K1A 0G9 mkichian@bankofcanada.ca 3Department of Economics Washington University St. Louis, MO, U.S.A. 63130-4899 morley@wueconc.wustl.edu … Kenourgios, D, Samitas, A & Paltalidis, N (2011), ‘Financial Crises and Stock Market Contagion in a Multivariate Time-Varying Asymmetric Framework’, Journal of International Financial Markets, Institutions and Money, vol. BibTex; Full citation Abstract. In our study, we examine contagions materialising between the stock market indices of three countries in the Visegrád region – Poland, Czech Republic, Hungary – and selected developed countries – USA and Germany. Fundamental valuation, share price development in the presence of asymmetric information, the speculative behavior of noise traders and chartists, herding and the feedback and learning mechanisms that surge within the markets are key aspects of these dynamics. Bubbles and Contagion in Financial Markets explores concepts, intuition, theory, and models. Contagion Effects of Bank Failures: Evidence from Capital Markets* I. However, although the 1880-1914 and 1972-2014 eras were both marked by significant capital market integration, contagion was only present in the former period. Year of publication: 2003 2. These prognosticators believe they have pinpointed “a means of structurally understanding the U.S. capital markets in relation to risks or reversal and crisis contagion.” “Crisis contagion” seems especially apt this week given events in Turkey. For the country equity market we used the MSCI standard country index. A historic slump was followed by a historic rally. We found that most of Central and Eastern European (CEE) capital markets showed contagion in relation to both Western European and US markets between 2005 and 2009, while Slovakian and Estonian markets showed no contagion. Since then, the behavior of financial markets during turbulent periods has attracted attention. Third, the market liberalization has reduced the cost of capital and price volatility for most of the markets. Introduction It is often suggested that the "contagion" effect of bank failure is one of the main reasons for bank regulation (e.g., Meltzer 1967; Benston 1973; Burns 1974). Main Research - Contagion Effects in Capital Markets (Prof. Dr. Holger Kraft) financially supported by the German Research Foundation (DFG) from 2008 to 2011 Home Downloadable! “Populations are much more aware than in the past. In their model, assets' long-run values . by Toni Gravelle, Maral Kichian, and James Morley. By David Hirshleifer and Siew Hong Teoh. How stock markets relate to each other is very important because this could have positive effects (such as enhancing economic growth) but also negative effects (possible contagion risks). Armeanu et all (2014) studied the financial contagion of the capital markets, as a result of instability or financial shocks, such as financial crisis, and also the way financial contagion occurs. than bull market contagion within market classes, across markets, and within regions. Contagion in the equity market indicates an increased risk aversion in investors and less availability of funding for listed companies in that speci c country. 21, no. Prevailing models of capital markets capture a limited form of social influence and information transmission, in which the beliefs and behavior of an investor affect others only through market price, information transmission and processing is simple (without thoughts and feelings), and there is no localization in the influence of an investor on others. This finding, which is consistent with those of earlier empirical studies, highlights the asymmetric nature of the financial transmission mechanism across stock markets. By David Hirshleifer and Siew Hong Teoh. We review here evidence concerning how these activities cause beliefs and behaviors to spread, affect financial decisions, and affect market prices; and theoretical models of social influence and its effects on capital markets. Prevailing models of capital markets capture a limited form of social influence and information transmission, in which the beliefs and behavior of an investor affects others only through market price, information transmission and processing is simple (without thoughts and feelings), and there is no localization in the influence of an investor on others. “Contagion increases risk premia, which generates headwinds to activity as the cost of capital goes up and people think twice,” he said. Not until the Asian currency collapse of 1997, however, did contagion become a major research area in international finance. For CDS spreads, Thomson Reuters Sovereign CDS. Di erent from \slow-burn spillover" or inter-dependence among these markets, \fast and furious" contagion can occur instantly. Abstract. capital flows driven by contagion. 2. Studies of financial contagion date back to the 1987 U.S. stock market crash. Volatility reached levels unseen since the Great Financial Crisis. \Fast and furious" contagion across capital markets is an important phenomenon in an increasingly integrated nancial world. This opens up the possibility that if informed investors are forced to sell emerging market capital markets across the globe. Sector contagion may be asymmetric, in the sense that some sectors are more severely affected by external shocks than others within a market. Get PDF (436 KB) Cite . Thought and Behavior Contagion in Capital Markets . ects a loss of capital or of funding in the a ected country’s banking system. See Hirshleifer and Teoh (2009) for a general review of behavior contagion in capital markets. International Capital Markets Department Extreme Contagion in Equity Markets Prepared by Jorge A. Chan-Lau, Donald J. Mathieson, and James Y. Yao1 Authorized for distribution by Gerd Hausler May 2002 Abstract The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. 1, pp. the cumulative number of people affected by an epidemic follows an S-shaped logistic curve over time. However, although the 1880-1914 and 1972-2014 eras were both marked by significant capital market integration, contagion was only present in the former period. We apply the framework to three granular proprietary ECB datasets, including an interbank network of 26 large euro area banks as well as their overlapping portfolios of loans, derivatives and securities. The capital controls and market segmentation implemented from the 1930s to the Bretton Woods years may explain the absence of stock market contagion during the 1918-1939 and 1946-1971 periods. Get PDF (436 KB) Abstract. INTERCONNECTEDNESS AND CONTAGION Prepared by Hal S. Scott with assistance from the staff of the Committee on Capital Markets Regulation November 20, 2012 However, during 2010–2016, Croatian market showed de-contagion in relation to Western European market, while Bulgarian, Czech, Hungarian, and Polish markets showed … The uninformed try to extract information from informed investors’ trades. Capital controls and market segmentation implemented from the 1930s to the Bretton Woods years may explain the absence of stock market contagion during the 1918-1939 and 1946-1971 periods. This feedback relation is consistent with the predictions of both the stockand flow-oriented exchange rate models. Capital Market Contagion in the Stock Markets of Visegrád Countries Based on the Heckman Selection Model* Máté Csiki – Gábor Dávid Kiss In our study, we examine contagions materialising between the stock market indices of three countries in the Visegrád region – Poland, Czech Republic, Hungary – and selected developed countries – USA and Germany. Capital Flows and Capital Flight on the Eve of Crises ... prices to explain financial market contagion. Contagion can occur through direct interbank exposures, and indirect exposures due to overlapping portfolios with the associated price dynamics via fire sales. Thought and Behavior Contagion in Capital Markets . This finding, which is consistent with those of earlier empirical studies, highlights the asymmetric nature of the financial transmission mechanism across stock markets. Considering this issue, this study proposes continuous evaluation of the cross-correlations between markets, applying a sliding windows approach based on the detrended cross-correlation analysis … CrossRef Google Scholar Thought and Behavior Contagion in Capital Markets . By David Hirshleifer and Siew Hong Teoh. Downloadable! Abstract. COVID-19: Contagion risks also apply to markets Allianz SE | Munich | Jul 15, 2020 When Minsky strikes, Markovitz retreats. The current study is a continuation of an analysis of contagion effects in capital markets during the last financial crisis, but this time it deals with the effects of contagion in European markets. Capital Markets. The paper examines the case in which the capital market is populated by informed and uninformed investors. 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