Contagion in the stock markets: The Asian financial crisis revisited |
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Authors: | Saleheen Khan Kwang Woo Park |
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Institution: | aDepartment of Economics, Minnesota State University, Mankato, MN 56002, United States |
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Abstract: | This paper presents empirical evidence of herding contagion in the stock markets during the 1997 Asian financial crisis, above and beyond macroeconomic fundamental driven co-movements. We analyze the cross-country time-varying correlation coefficients among the stock prices for the countries of Thailand, Malaysia, Indonesia, Korea, and the Philippines, between crisis and tranquil periods. Macromodels are constructed and implemented to capture the pure contagion effects on the markets. After controlling for the economic fundamentals for the five countries, the paper finds strong evidence of herding contagion. |
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Keywords: | Financial markets Currency crisis Herd behavior Contagion Kalman filter |
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