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Journal of Finance Vol. 61 No. 2 2006

How Do Crises Spread? Evidence from Accessible and Inaccessible Stock Indices

BRIAN H. BOYER1; TOMOMI KUMAGAI2; Kathy Yuan3,4

1 Brigham Young University · 2 Wayne State University · 3 University of Michigan–Ann Arbor · 4 Versar (United States)

Abstract

We provide empirical evidence that stock market crises are spread globally through asset holdings of international investors. By separating emerging market stocks into two categories, namely, those that are eligible for purchase by foreigners (accessible) and those that are not (inaccessible), we estimate and compare the degree to which accessible and inaccessible stock index returns co‐move with crisis country index returns. Our results show greater co‐movement during high volatility periods, especially for accessible stock index returns, suggesting that crises spread through the asset holdings of international investors rather than through changes in fundamentals.

DOI
10.1111/j.1540-6261.2006.00860.x
Volume
61
Issue
2
Pages
957-1003
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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