Markov Switching Models with Application to Contagion Effect Analysis in the Capital Markets
DOI:
https://doi.org/10.12775/DEM.2009.007Keywords
Markov switching model, contagion effectAbstract
This article presents the analysis of the contagion effect in the capital markets on the basis of the Markov switching models MS. The research is based on the return of the indexes. There is a distinction of two regimes with different volatility levels, the calm period and the crisis period. Then the analysis of the period’s occurrence was conducted, in reference to global financial crisis. Periods with a similar level of volatility occurrence in the same time. This analysis evidences the shocks transmission between financial markets, what confirms an occurrence of the contagion effect.
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