Dynamic Conditional Correlation Analysis Asia Pacific and Latin America Equity Market: Interdependence and Contagion

Abstract

This research analyzed dynamic correlation in daily equity price data on thirteen Asia Pacific countries and five Latin America countries for period of 2003 to 2012. We identified two crisis periods in our research. The first periode is the global financial crisis trigerred by United States´s internal crisis, and the second is the financial crisis happened within the European countries. This empirical research using Dynamic Conditional Correlation as a multivariate GARCH method suggests that there is a high average dynamic correlation especially in the internal region of Asia Pacific and Latin America. In addition, there are also an interdependence and minor contagion effect in these several countries. Result of our research also finds that there are comfounding effects between these two crisis periods.