The empirical objective of this study is to account for the time-variation the covariances between markets. Using data on sixteen national stock markets, we estimate a multivariate factor model in which the volatility of returns is induced by changing volatility in the orthogonal factors. Excess...

This paper investigates why, in October 1987, almost all stock markets fell together despite widely differing economic circumstances. The idea is that quot;contagionquot; between markets occurs as the result of attempts by rational agents to infer information from price changes in other markets....