Contagion Testing in Embryonic Markets Under Alternative Stressful US Market Scenarios

Mahadeo, Scott M.R.; Heinlein, Reinhold; Legrenzi, Gabriella Deborah

Abstract

We consolidate alternative ways for identifying stable and stressful scenarios in the S&P 500 market to construct contagion tests for recipient markets vulnerable to disturbances from this source market. The S&P 500 is decomposed into discrete conditions of: (1) Tranquil versus turbulent volatility; (2) Bull versus bear market phases; (3) Normal periods versus asset bubbles and crises. We analyse the relationship between the S&P 500 and major emerging Caribbean stock markets and find that, despite the prominent trade related exposure to the US, financial linkages are much less pronounced than might be expected outside of the Great Recession.

Citation

Mahadeo, S. M., Heinlein, R., & Legrenzi, G. D. (2019). Contagion Testing in Embryonic Markets Under Alternative Stressful US Market Scenarios. SSRN, https://doi.org/10.2139/ssrn.3523533

• Journal Article Type: Article
• Online Publication Date: Jan 23, 2020
• Publication Date: 2019-12
• Deposit Date: Nov 21, 2023
• Journal: SSRN Electronic Journal
• Peer Reviewed: Peer Reviewed
• DOI: https://doi.org/10.2139/ssrn.3523533
• Keywords: Pharmacology (medical)
• Publisher URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3523533