![]() ![]() ![]() During the same time, 90 percent of equity markets sustained contagion level crisis through a third party, within Europe, Germany DAX was the only one spared from contagion in phases of the crisis. ![]() During phase 2, 82 per cent of the group of equity markets in European countries sustained contagion from US S&P 500. In fact, during phase 1 equity markets of Netherland was the only major source of contagion within Europe, although weak forms of contagion were also seen from equity markets of Britain and France within Europe. During phase 1 of crisis, there was no contagion from US S&P 500. It was found that contagion of financial crisis was much severe in phase 2 than phase 1 both from US S&P 500 and within European equity markets. The data for equity indices in respective national economies covered 1 October 2005 to 31 March 2011, comprising initial pre-crisis period and a crisis period comprising two phases. Its units of analysis were log daily returns and log prices of equity market indexes. It employed three tests of contagion models: two of them based on correlation analysis and a third one based on cointegrating vectors. This research study examined strength of structural interlinkages between equity markets to explain cases of contagion of financial crisis from US subprime mortgage crisis 2007-09 to European economies of UK, Germany, France, Netherland, Switzerland, Sweden, Italy, Spain, Portugal, Ireland, and Greece primarily through equity markets. ![]()
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