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No contagion, only globalisation and flight to quality

In this article, tests for globalization and contagion are separated using an ex ante definition of crises, and contagion tests are neutralized with respect to globalization effects. A large database is constructed to study the stability of correlation matrices for four asset classes: equities, government bonds, investment-grade corporate bonds, and high-yield corporate bonds, in four geographical zones. Overall, the results confirm the instability of correlations and point to a combination of globalization and flight to quality, while emphasizing that contagion on the equity markets appears as an artifact due to globalization.

CHAPELLE Ariane , Consultant and Trainer in Finance and Risk Management - Tenured Associate Professor of Finance - Université Libre de Bruxelles
BRIERE Marie , Head of the Investor Research Center
SZAFARZ Ariane , ULB & New York University (NYU)

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No contagion, only globalisation and flight to quality
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