This thesis tests financial contagion from the US to ten African markets during the 2007-09 financial crisis. For comparative purposes, testing procedures are also extended to cover a number of developed-economy markets. There is considerable debate within the literature as to how to measure contagion. A central focus of my research is therefore to compare alternative econometric methodologies. VAR based constant-correlation based techniques are examined alongside dynamic conditional correlation (DCC) based techniques. I find that the DCC approach is superior in respect to my dataset. The 2007-09 crisis was unique from a contagion perspective in that its impact was truly global. This provided a unique opportunity to examine the subject across different continents and market types. African markets were found to have lower levels of integration (correlation) with the US than developed-economy markets and this resulted in considerable differences in the way that the contagion event spread across these two groups. As well as being truly global, the 2007-09 crisis was a contagion event that lasted more than a year. I use the volatility index (VIX) to identify both a long crisis period and a series of sub-events. The former ran from 15 September 2008 to 15 October 2009. The four sub-events were 15/09/2008-10/10/2008, 15/09/2008-17/10/2008, 15/09/2008-27/10/2008 and 15/09/2008-20/11/2008. Correlations (and contagion) changed significantly as sub-events unfolded. At the onset of the crisis, correlations with all African markets increased relatively quickly. I suggest that this can possibly be considered as being consistent with fast herding iv behaviour. The impact on developed markets was very different in that contagion spread slowly. I suggest that this can possibly be considered as being consistent with slow herding. I argue that differences in contagion found between African and developed markets reflect differences in social network effects in investor communities. I apply behavioural finance theory to more fully explore this issue and identify the channels through which contagion events developed.
| Identifer | oai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:650116 |
| Date | January 2014 |
| Creators | Ahmadu-Bello, J. |
| Publisher | Coventry University |
| Source Sets | Ethos UK |
| Detected Language | English |
| Type | Electronic Thesis or Dissertation |
| Source | http://curve.coventry.ac.uk/open/items/c9e2c0fe-dbce-4faa-abaf-945e5a282294/1 |
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