BazEkon - The Main Library of the Cracow University of Economics

BazEkon home page

Main menu

Author
Sallai Dóra (University of Szeged, Hungary), Mészáros Mercédesz (University of Szeged, Hungary), Kiss Gábor Dávid (University of Szeged, Hungary)
Title
How Do Stock Indices Respond to Market Shocks? Examining Stock Market Contagion in European Countries with Minimum Spanning Trees
Source
Econometric Research in Finance, 2022, vol. 7, nr 1, s. 93-123, rys., tab., wykr., bibliogr. 77 poz.
Keyword
Indeks giełdowy, Grafy, Kryzys subprime, COVID-19
Stock market indexes, Graphs, Subprime crisis, COVID-19
Note
JEL classification: D53, C33, G14, E44
summ.
Abstract
This paper analyses the structural changes of the European stock markets by using a minimum spanning tree graph. The aim was to point out similarities and differences of the previous recessions, namely the Subprime crisis around 2008, the European sovereign debt crisis of the 2010s and the recent COVID-19 period. Focusing on the structural changes of the graph, we were looking for the emergence of shock-propagating hub. During each of the three examined recession periods, we could see a constant change in the stock market network, where stock market indices are connected mainly through one central index during turbulent times, while the connections became more diverse in calm periods(original abstract)
Accessibility
The Library of Warsaw School of Economics
Full text
Show
Bibliography
Show
  1. Ahlgren, N. Antell, J. (2010). Stock Market Linkages and Financial Contagion: A Cobreaking Analysis." The Quarterly Review of Economics and Finance", 50(2):157-166.
  2. Alderson, D. L. (2008). Catching the "Network Science" Bug: Insight and Opportunity for the Operations Researcher. "Operations Research", 56(5):1047-1065.
  3. Angela-Maria, F., Maria, P. A., Miruna, P. M. (2015). An Empirical Investigation of Herding Behavior in CEE Stock Markets Under the Global Financial Crisis. "Procedia Economics and Finance", 25:354-361.
  4. Apergis, N. (2015). Policy Risks, Technological Risks and Stock Returns: New Evidence from the US Stock Market. "Economic Modelling", 51:359-365.
  5. Arghyrou, M. G. Kontonikas, A. (2012). The EMU Sovereign-Debt Crisis: Fundamentals, Expectations and Contagion." Journal of International Financial Markets, Institutions and Money", 22(4):658-677.
  6. Astuty, P. (2017). The Influence of Fundamental Factors and Systematic Risk to Stock Prices on Companies Listed in the Indonesian Stock Exchange." European Research Studies Journal", 20(4A):230-240.
  7. Barabasi, A.-L. (2016). Network Science. http://networksciencebook.com/.
  8. Barabasi, A.-L. and Albert, R. (1999). Emergence of Scaling in Random Networks. "Science", 286(5439):509-512.
  9. Bekaert, G., Ehrmann, M., Fratzscher, M., Mehl, A. (2011). Global Crises and Equity Market Contagion. Working Paper 1381, European Central Bank.
  10. Bekiros, S. D. (2014). Contagion, Decoupling and the Spillover Effects of the US Financial Crisis: Evidence from the BRIC Markets." International Review of Financial Analysis", 33:58-69.
  11. Bonanno, G., Lillo, F., Mantegna, R. N. (2001). Levels of Complexity in Financial Markets. "Physica A: Statistical Mechanics and its Applications", 299(1-2):16-27.
  12. Boschi, M. (2005). International Financial Contagion: Evidence from the Argentine Crisis of 2001-2002." Applied Financial Economics", 15(3):153-163.
  13. Brida, J. G. Risso, W. A. (2008). Multidimensional Minimal Spanning Tree: The Dow Jones Case." Physica A: Statistical Mechanics and its Applications", 387(21):5205-5210.
  14. Calvo, G. A., Leiderman, L., Reinhart, C. M. (1996). Inflows of Capital to Developing Countries in the 1990s. "The Journal of Economic Perspectives", 10(2):123-139.
  15. Chen, Y., Li, Y., Pantelous, A. A., Stanley, H. E. (2022). Short-Run Disequilibrium Adjustment and Long-Run Equilibrium in the International Stock Markets: A Network-Based Approach." International Review of Financial Analysis", 79.
  16. Chong, E., Han, C., Park, F. C. (2017). Deep Learning Networks for Stock Market Analysis and Prediction: Methodology, Data Representations, and Case Studies. "Expert Systems with Applications", 83:187-205.
  17. Chunxia, Y., Xueshuai, Z., Qian, L., Yanhua, C., Qiangqiang, D. (2014). Research on the Evolution of Stock Correlation Based on Maximal Spanning Trees. "Physica A: Statistical Mechanics and its Applications", 415:1-18.
  18. Claessens, S., Dornbusch, R., Park, Y. C. (2001). Contagion: Why Crises Spread and How This Can Be Stopped. W: Claessens, S. and Forbes, K. J., editors, International Financial Contagion, pages 19-41. Springer, New York.
  19. Coelho, R., Gilmore, C. G., Lucey, B., Richmond, P., Hutzler, S. (2007). The Evolution of Interdependence in World Equity Markets - Evidence from Minimum Spanning Trees. "Physica A: Statistical Mechanics and its Applications", 376:455-466.
  20. Corsetti, G., Pericoli, M., Sbracia, M. (2005). 'Some Contagion, Some Interdependence': More Pitfalls in Tests of Financial Contagion." Journal of International Money and Finance", 24(8):1177-1199.
  21. Cozier, J. G. Watson, P. K. (2019). Co-movement in Stock Prices in Emerging Economies: The Case of the CARICOM Region. "International Economic Journal", 33(1):111-127.
  22. Csiki, M. Kiss, G. D. (2018). Tokepiaci fertozesek a visegradi orszagok reszvenypiacain a Heckman-fele szelekcios modell alapjan." Hitelintezeti Szemle/Financial and Economic Review", 17(4):23-52.
  23. Cupal, M., Deev, O., Linnertova, D. (2012). Network Structures of the European Stock Markets. In Proceedings of 30th International Conference Mathematical Methods in Economics, pages 79-84. Silesian University in Opava, School of Business Administration Karvina Karvina.
  24. De Bock, R. de Carvalho Filho, I. (2015). The Behavior of Currencies During Risk-Off Episodes." Journal of International Money and Finance", 53:218-234.
  25. Dua, P. Tuteja, D. (2016). Contagion in International Stock and Currency Markets During Recent Crisis Episodes. Working paper 258, Centre for Development Economics, Delhi School of Economics.
  26. Dungey, M. Martin, V. L. (2007). Unravelling Financial Market Linkages During Crises." Journal of Applied Econometrics", 22(1):89-119.
  27. Engle, R. (2002). Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models. "Journal of Business & Economic Statistics", 20(3):339-350.
  28. Eryigit, M. Eryigit, R. (2009). Network Structure of Cross-Correlations Among the World Market Indices. "Physica A: Statistical Mechanics and its Applications", 388(17):3551-3562.
  29. Fama, E. F. (1965). The Behavior of Stock-Market Prices. "The Journal of Business", 38(1):34-105.
  30. Fornari, F. Mele, A. (2013). Financial Volatility and Economic Activity. "Journal of Financial Management, Markets and Institutions", 1(2):155-196.
  31. Garas, A., Argyrakis, P., Havlin, S. (2008). The Structural Role of Weak and Strong Links in a Financial Market Network. "The European Physical Journal B", 63(2):265-271.
  32. Grammatikos, T. Vermeulen, R. (2012). Transmission of the Financial and Sovereign Debt Crises to the EMU: Stock Prices, CDS Spreads and Exchange Rates. "Journal of International Money and Finance", 31(3):517-533.
  33. Gunay, S. (2020). A New Form of Financial Contagion: COVID-19 and Stock Market Responses. Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3584243.
  34. Holmes, M. J. Maghrebi, N. (2016). Financial Market Impact on the Real Economy: An Assessment of Asymmetries and Volatility Linkages between the Stock Market and Unemployment Rate." The Journal of Economic Asymmetries", 13:1-7.
  35. Huang, C. L. (2020). International Stock Market Co-movements Following US Financial Globalization. "International Review of Economics & Finance", 69:788-814.
  36. Hung, N. T. (2017). An Empirical Test on Linkage between Foreign Exchange Market and Stock Market: Evidence from Hungary, Czech Republic, Poland and Romania. "European Scientific Journal", 13(31):25-38.
  37. Hung, N. T. (2022). Spillover Effects between Stock Prices and Exchange Rates for the Central and Eastern European Countries. "Global Business Review", 23(2):259-286.
  38. Ji, Q., Liu, B.-Y., Cunado, J., Gupta, R. (2020). Risk Spillover between the US and the Remaining G7 Stock Markets Using Time-Varying Copulas with Markov Switching: Evidence from Over a Century of Data. "The North American Journal of Economics and Finance", 51.
  39. Kanas, A. (2005). Regime Linkages between the Mexican Currency Market and Emerging Equity Markets." Economic Modelling", 22(1):109-125.
  40. Kantz, H., Altmann, E. G., Hallerberg, S., Holstein, D., Riegert, A. (2006). Dynamical Interpretation of Extreme Events: Predictability and Predictions .W: Albeverio, S., Jentsch, V., Kantz, H., editors, Extreme Events in Nature and Society, pages 69-93. Springer, Berlin, Heidelberg.
  41. Kenett, D. Y. Havlin, S. (2015). Network Science: A Useful Tool in Economics and Finance." Mind & Society", 14(2):155-167.
  42. Kenett, D. Y., Huang, X., Vodenska, I., Havlin, S., Stanley, H. E. (2015). Partial Correlation Analysis: Applications for Financial Markets. "Quantitative Finance", 15(4):569-578.
  43. Kenourgios, D., Samitas, A., Paltalidis, N. (2011). Financial Crises and Stock Market Contagion in a Multivariate Time-Varying Asymmetric Framework." Journal of International Financial Markets, Institutions and Money", 21(1):92-106.
  44. Kiraly, J., Nagy, M., Szabo E, V. (2008). Egy kulonleges esemenysorozat elemzese-a masodrendu jelzaloghitel-piaci valsag es (hazai) kovetkezmenyei. "Kozgazdasagi Szemle", 55(7-8):573-621.
  45. Kiss, G. D. (2017). Volatilitas, extrem elmozdulasok es tokepiaci fertozesek. Jatepress. Szeged.
  46. Kumar, S. Deo, N. (2013). Analyzing Crisis in Global Financial Indices. W: Abergel, F., Chakrabarti, B., Chakraborti, A., Ghosh, A., editors, Econophysics of Systemic Risk and Network Dynamics, pages 261-275. Springer, Milano.
  47. Lai, Y. Hu, Y. (2021). A Study of Systemic Risk of Global Stock Markets Under COVID-19 Based on Complex Financial Networks." Physica A: Statistical Mechanics and its Applications", 566.
  48. Lee, G. S. Djauhari, M. A. (2012). An Overall Centrality Measure: The Case of U.S Stock Market. "International Journal of Basic & Applied Sciences", 12(6):99-103.
  49. Liu, Q. Tse, Y. (2017). Overnight Returns of Stock Indexes: Evidence from ETFs and Futures. "International Review of Economics & Finance", 48:440-451.
  50. Lucey, B. M. Voronkova, S. (2008). Russian Equity Market Linkages Before and After the 1998 Crisis: Evidence from Stochastic and Regime-Switching Cointegration Tests. "Journal of International Money and Finance", 27(8):1303-1324.
  51. Luchtenberg, K. F. Vu, Q. V. (2015). The 2008 Financial Crisis: Stock Market Contagion and its Determinants." Research in International Business and Finance", 33:178-203.
  52. Nitoi, M. Pochea, M. M. (2019). What Drives European Union Stock Market Co-movements? "Journal of International Money and Finance", 97:57-69.
  53. Nugroho, R. H., Andarini, S., Wijaya, R. S., Prabowo, B. (2020). Analysis of the Effect of Exchange Value, Inflation Level, SBI Interest Rate and Hang Seng Index for Joint Stock Price Index in Indonesia Stock Exchange (Study on IDX 2016-2019). "PalArch's Journal of Archaeology of Egypt/Egyptology", 17(6):8304-8314.
  54. Olbrys, J. Majewska, E. (2016). Crisis Periods and Contagion Effects in the CEE Stock Markets: The Influence of the 2007 US Subprime Crisis." International Journal of Computational Economics and Econometrics", 6(2):124-137.
  55. Onofrei, M., Caraus, u, D.-N., Lupu, D. (2019). The Role of the Macroeconomic Environment in Shaping Capital Market Co-movement in CEE Countries. "Economic research-Ekonomska istrazivanja", 32(1):3813-3834.
  56. Pappas, V., Ingham, H., Izzeldin, M., Steele, G. (2013). Financial Markets Synchronization and Contagion: Evidence from CEE and Eurozone. Available at SSRN: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2411978.
  57. Pradhan, R. P., Arvin, M. B., Bahmani, S. (2015a). Causal Nexus between Economic Growth, Inflation, and Stock Market Development: The Case of OECD Countries. "Global Finance Journal", 27:98-111.
  58. Pradhan, R. P., Arvin, M. B., Ghoshray, A. (2015b). The Dynamics of Economic Growth, Oil Prices, Stock Market Depth, and Other Macroeconomic Variables: Evidence from the G-20 Countries. "International Review of Financial Analysis", 39:84-95.
  59. Purnamawati, I. G. A. (2016). The Effect of Capital Structure and Profitability on Stock Price (Study of the Manufacturing Sector in Indonesia Stock Exchange). "International Journal of Business, Economics and Law", 9(1):10-16.
  60. Sabilla, A. R. Kurniasih, A. (2020). The Effect of Macroeconomics on Stock Index. "Journal of Economics and Management Studies", 7(3):85-92.
  61. Saeedian, M., Jamali, T., Kamali, M. Z., Bayani, H., Yasseri, T., Jafari, G. R. (2019). Emergence of World-Stock-Market Network. "Physica A: Statistical Mechanics and its Applications", 526.
  62. Sandoval, L. (2014). Correlation and Network Structure of International Financial Markets in Times of Crisis. W: Arouri, M., Boubaker, S., Nguyen, D., editors, Emerging Markets and the Global Economy, chapter 33, pages 795-810. Academic Press, San Diego.
  63. Sandoval Jr, L. (2012). Pruning a Minimum Spanning Tree." Physica A: Statistical Mechanics and its Applications", 391(8):2678-2711.
  64. Schweitzer, F., Fagiolo, G., Sornette, D., Vega-Redondo, F., Vespignani, A., White, D. R. (2009). "Economic Networks: The New Challenges. Science", 325(5939):422-425.
  65. Stavroglou, S., Pantelous, A., Soramaki, K., Zuev, K. (2017). Causality Networks of Financial Assets." Journal of Network Theory in Finance", 3(2):17-67.
  66. Sun, W., Rachev, S., Fabozzi, F. J., Kalev, P. S. (2009). A New Approach to Modeling Co-movement of International Equity Markets: Evidence of Unconditional Copula-Based Simulation of Tail Dependence. "Empirical Economics", 36(1):201-229.
  67. Tekin, B. Yener, E. (2019). The Causality between Economic Growth and Stock Market in Developing and Developed Countries: Toda-Yamamoto Approach. "Theoretical and Applied Economics", 26(2):79-90.
  68. Vo, X. V. (2017). Do Foreign Investors Improve Stock Price Informativeness in Emerging Equity Markets? Evidence from Vietnam. "Research in International Business and Finance", 42:986-991.
  69. Walid, C., Chaker, A., Masood, O., Fry, J. (2011). Stock Market Volatility and Exchange Rates in Emerging Countries: A Markov-State Switching Approach. "Emerging Markets Review", 12(3):272-292.
  70. Wang, L. (2019). Measuring the Effects of Unconventional Monetary Policy on MBS Spreads: A Comparative Study. "The North American Journal of Economics and Finance", 49:235-251.
  71. Wang, X. F. Chen, G. (2003). Complex Networks: Small-World, Scale-Free and Beyond." IEEE Circuits and Systems Magazine", 3(1):6-20.
  72. Watts, D. J. Strogatz, S. H. (1998). Collective Dynamics of 'Small-World' Networks. "Nature", 393(6684):440-442.
  73. Xu, N. Li, S. (2020). Segment Stock Market, Foreign Investors, and Cross-Correlation: Evidence from MMF-DCCA and Spillover Index. Complexity, 2020.
  74. Yao, J., Ma, C., He, W. P. (2014). Investor Herding Behaviour of Chinese Stock Market." International Review of Economics & Finance", 29:12-29.
  75. Yin, K., Liu, Z., Liu, P. (2017). Trend Analysis of Global Stock Market Linkage Based on a Dynamic Conditional Correlation Network. "Journal of Business Economics and Management", 18(4):779-800.
  76. Zhang, W., Zhuang, X., Lu, Y. (2020). Spatial Spillover Effects and Risk Contagion Around G20 Stock Markets Based on Volatility Network. "The North American Journal of Economics and Finance", 51.
  77. Zhao, L., Wang, G.-J., Wang, M., Bao, W., Li, W., Stanley, H. E. (2018). Stock Market as Temporal Network". Physica A: Statistical Mechanics and its Applications", 506(3-4):1104-1112.
Cited by
Show
ISSN
2451-1935
2451-2370
Language
eng
URI / DOI
https://doi.org/10.2478/erfin-2022-0003
Share on Facebook Share on Twitter Share on Google+ Share on Pinterest Share on LinkedIn Wyślij znajomemu