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Journal of Banking & Finance Vol. 58 2015

Endogenous crisis dating and contagion using smooth transition structural GARCH

Mardi Dungey1; George Milunovich2; Susan Thorp3; Minxian Yang4

1 University of Tasmania · 2 Macquarie University · 3 The University of Sydney · 4 UNSW Sydney

open access

Abstract

Detecting contagion during financial crises requires the demarcation of crisis periods. We develop a method for endogenously dating both the start and finish of crises, along with measuring contagion effects. Identification is achieved by coupling smooth transition functions with structural GARCH. In an application to US equity, bond and REIT returns for 2001–2010, we identify four phases; a pre-crisis period to July 2007, two phases of crisis up to and following October 2008, and a post-crisis phase from mid-May 2009. We detect significant contagion during the crisis and find evidence that the post-crisis period has not returned to pre-crisis relations.

DOI
10.1016/j.jbankfin.2015.04.006
Volume
58
Pages
71-79
Language
en
Sources
crossref openalex bibtex:phds-export.bib

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