Financial market stability--A test
This paper proposes a definition for financial market stability and an econometric test. It analyzes the impact of systematic and systemic shocks on developed and emerging market stock indices in normal and extreme market conditions. Financial market stability is defined as a constant impact of systematic shocks in normal and extreme market situations. Empirical results show that the impact of systematic shocks is significantly larger in extreme market conditions than in normal conditions for emerging markets. In contrast, the relationship is stable for developed markets. Hence, only developed markets meet an essential condition for financial market stability.
Year of publication: |
2009
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Authors: | Baur, Dirk G. ; Schulze, Niels |
Published in: |
Journal of International Financial Markets, Institutions and Money. - Elsevier, ISSN 1042-4431. - Vol. 19.2009, 3, p. 506-519
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Publisher: |
Elsevier |
Keywords: | Financial stability Systematic risk Contagion Quantile regression |
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