Abstract
This paper deals with the theme of contagion in financial markets. At this aim, we develop a model based on Mixed Poisson Processes to describe the abnormal returns of financial markets of two considered countries. In so doing, the article defines the theoretical conditions to be satisfied in order to state that one of them – the so-called leader – exercises contagion on the others — the followers. Specifically, we employ an invariant probabilistic result stating that a suitable transformation of a Mixed Poisson Process is still a Mixed Poisson Process. The theoretical claim is validated by implementing an extensive simulation analysis grounded on empirical data. The countries considered are the U.S. (as the leader) and Italy (as the follower) and the period under scrutiny is very large, ranging from 1970 to 2014.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
More From: Physica A: Statistical Mechanics and its Applications
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.