Deconstructing the Nasdaq bubble: A look at contagion across international stock markets |
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| Institution: | 1. Institute for the Advancement of Business and Technology, Saint Louis University Madrid Campus, Avenida del Valle 34, 28003 Madrid, Spain;2. Simon Center for Regional Forecasting, Department of Economics, Saint Louis University, 3674 Lindell Boulevard, St. Louis, MO 63088, USA;3. Department of Business Policy, NUS Business School, National University of Singapore, 1 Business Link, Singapore 117592, Singapore;1. Department of Economics, Eastern Mediterranean University, Turkey;2. Department of Economics, University of Pretoria, Pretoria, South Africa;3. College of Business Administration, University of Nebraska at Omaha, USA;1. Department of Economics and Finance, United Arab Emirates University, Al Ain, United Arab Emirates;2. Westminster business school, University of Westminster, London, NW1 5LS, United Kingdom;1. German Centre for Integrative Biodiversity Research (iDiv) Halle-Jena-Leipzig, Puschstraße 4, 04103 Leipzig, Germany;2. University of Ulsan, Department of Economics, Ulsan, 44610, South Korea;3. Department of Economics and Finance, Istanbul Gelisim University, Istanbul, Turkey;4. Department of Economics and Finance, Nisantasi University, İstanbul, Turkey;5. Department of Financial Technologies, South Ural State University, Chelyabinsk, Russia |
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| Abstract: | Share prices for the technology, media, and telecommunication (TMT) sector experienced phenomenal growth and decline at the turn of this century in the U.S. and many other OECD economies. We investigate whether contagion occurred from the U.S. to other international stock markets after the Nasdaq bubble collapsed. Results document a significant structural break in comovements between the international TMT sectors, and suggest that the collapse of the stock market in more than a dozen countries is tied to close sectoral links (particularly in TMT), and cannot be attributed to widespread contagion. We also show the importance of modeling the intrinsic heteroskedasticity in the data using a GARCH framework for inferences on contagion. |
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