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Contagion of the Subprime Financial Crisis on Frontier Stock Markets: A Copula Analysis

1
Department of Management, Universidade de Évora, 7000-812 Évora, Portugal
2
CEFAGE, Universidade de Évora, 7000-812 Évora, Portugal
3
VALORIZA—Research Center for Endogenous Resource Valorization, 7300-110 Portalegre, Portugal
4
Department of Economics, Universidade de Évora, 7000-812 Évora, Portugal
*
Author to whom correspondence should be addressed.
Economies 2019, 7(1), 15; https://doi.org/10.3390/economies7010015
Received: 13 December 2018 / Revised: 6 February 2019 / Accepted: 10 February 2019 / Published: 26 February 2019
(This article belongs to the Special Issue Impact of Macroeconomic Indicators on Stock Market)
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PDF [353 KB, uploaded 6 March 2019]

Abstract

This study assesses contagion from the USA subprime financial crisis on a large set of frontier stock markets. Copula models were used to investigate the structure of dependence between frontier markets and the USA, before and after the occurrence of the crisis. Statistically significant evidence of contagion could only be found in the European region, with the markets of Croatia and Romania being affected. The remaining European markets in our sample and the others, located in America, Middle East, Africa, and Asia, appear to have been isolated from the subprime crisis impact. These results are useful for international investors interested in enlarging the geographical diversification of their portfolios, but also for the considered countries’ policymakers who should attempt to improve the attractiveness of stock markets for domestic and foreign investors while simultaneously attempting to maintain their relative level of insulation against future foreign crises. View Full-Text
Keywords: copula models; financial contagion; financial crises; frontier markets copula models; financial contagion; financial crises; frontier markets
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).
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Mohti, W.; Dionísio, A.; Ferreira, P.; Vieira, I. Contagion of the Subprime Financial Crisis on Frontier Stock Markets: A Copula Analysis. Economies 2019, 7, 15.

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