Flights and contagion--An empirical analysis of stock-bond correlations

Journal of Financial Stability, 2009, vol. 5, issue 4, 339-352

Abstract: This paper analyzes the existence of flights from stocks to bonds and vice versa. We propose a definition and a test for flight-to-quality, flight-from-quality and cross-asset contagion and examine their characteristics and effects for the financial system. The empirical analysis for eight developed countries including the US, the UK, Germany and Japan shows that flights exist and are a common feature in many crises episodes. Our findings also reveal that flights are not merely country-specific events but occur simultaneously across countries. This indicates that there is a link between the occurrence of flights and cross-country contagion. Moreover, we show that flights enhance the resiliency of the financial markets by providing diversification benefits in times when they are needed most.

Keywords: Flight-to-quality; Flight-from-quality; Cross-asset; contagion; Cross-country; contagion; Multivariate; GARCH; Panel; regression (search for similar items in EconPapers)
Date: 2009
References: Add references at CitEc
Citations: View citations in EconPapers (159)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1572-3089(08)00048-X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:5:y:2009:i:4:p:339-352

Access Statistics for this article

Journal of Financial Stability is currently edited by I. Hasan, W. C. Hunter and G. G. Kaufman

More articles in Journal of Financial Stability from Elsevier
Bibliographic data for series maintained by Catherine Liu ().