Main Research - Contagion Effects in Capital Markets (Prof. Dr. Holger Kraft) financially supported by the German Research Foundation (DFG) from 2008 to 2011 Home We review here evidence concerning how these activities cause beliefs and behaviors to spread, affect financial decisions, and affect market prices; and theoretical models of social influence and its effects on capital markets. BibTex; Full citation Abstract. than bull market contagion within market classes, across markets, and within regions. Contagion in the equity market indicates an increased risk aversion in investors and less availability of funding for listed companies in that speci c country. This finding, which is consistent with those of earlier empirical studies, highlights the asymmetric nature of the financial transmission mechanism across stock markets. Thought and Behavior Contagion in Capital Markets . Global capital is presently fleeing risky markets for safer, more stable shores (these United States, for one). The capital controls and market segmentation implemented from the 1930s to the Bretton Woods years may explain the absence of stock market contagion during the 1918-1939 and 1946-1971 periods. However, during 2010–2016, Croatian market showed de-contagion in relation to Western European market, while Bulgarian, Czech, Hungarian, and Polish markets showed … capital markets across the globe. than bull market contagion within market classes, across markets, and within regions. Fundamental valuation, share price development in the presence of asymmetric information, the speculative behavior of noise traders and chartists, herding and the feedback and learning mechanisms that surge within the markets are key aspects of these dynamics. Finally, as for the contagion effects, data from Korea, Malaysia, and Philippines indicate strong feedback relations between stock prices and exchange rates. Armeanu et all (2014) studied the financial contagion of the capital markets, as a result of instability or financial shocks, such as financial crisis, and also the way financial contagion occurs. By David Hirshleifer and Siew Hong Teoh. Studies of financial contagion date back to the 1987 U.S. stock market crash. Not until the Asian currency collapse of 1997, however, did contagion become a major research area in international finance. Abstract: Prevailing models of capital markets capture a limited form of social influence and information transmission, in which the beliefs and behavior of an investor affect others only through market price, information transmission and processing Prevailing models of capital markets capture a limited form of social influence and information transmission, in which the beliefs and behavior of an investor affect others only through market price, information transmission and processing is simple (without thoughts and feelings), and there is no localization in the influence of an investor on others. the cumulative number of people affected by an epidemic follows an S-shaped logistic curve over time. See Hirshleifer and Teoh (2009) for a general review of behavior contagion in capital markets. Get PDF (436 KB) Cite . Abstract. However, although the 1880-1914 and 1972-2014 eras were both marked by significant capital market integration, contagion was only present in the former period. 2. Downloadable! ects a loss of capital or of funding in the a ected country’s banking system. Downloadable! This opens up the possibility that if informed investors are forced to sell emerging market For CDS spreads, Thomson Reuters Sovereign CDS. Capital Markets. The Covid-19 crisis caused one of the most severe financial market turmoil of the last hundred years. This feedback relation is consistent with the predictions of both the stockand flow-oriented exchange rate models. Get PDF (436 KB) Abstract. This finding, which is consistent with those of earlier empirical studies, highlights the asymmetric nature of the financial transmission mechanism across stock markets. Since then, the behavior of financial markets during turbulent periods has attracted attention. A historic slump was followed by a historic rally. Shift Contagion in Asset Markets by Toni Gravelle,1 Maral Kichian,2 and James Morley3 1International Capital Markets Department International Monetary Fund Washington, D.C., U.S.A. 20431 2Research Department Bank of Canada Ottawa, Ontario, Canada K1A 0G9 mkichian@bankofcanada.ca 3Department of Economics Washington University St. Louis, MO, U.S.A. 63130-4899 morley@wueconc.wustl.edu … Year of publication: 2003 By David Hirshleifer and Siew Hong Teoh. Contagion can occur through direct interbank exposures, and indirect exposures due to overlapping portfolios with the associated price dynamics via fire sales. Volatility reached levels unseen since the Great Financial Crisis. However, although the 1880-1914 and 1972-2014 eras were both marked by significant capital market integration, contagion was only present in the former period. Contagion Effects of Bank Failures: Evidence from Capital Markets* I. the contagion at the market level may mask the heterogeneous performances of various sectors. Introduction It is often suggested that the "contagion" effect of bank failure is one of the main reasons for bank regulation (e.g., Meltzer 1967; Benston 1973; Burns 1974). If the block of emerging economies is viewed as a segmented market, we found that investors will not assess the veracity of country-specific rumors if fixed information costs exceed one- sixth of the mean portfolio return prior to the emergence of a rumor. Bubbles and Contagion in Financial Markets explores concepts, intuition, theory, and models. How stock markets relate to each other is very important because this could have positive effects (such as enhancing economic growth) but also negative effects (possible contagion risks). by Toni Gravelle, Maral Kichian, and James Morley. 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