5.2.2. Contagion during the Asian "flu" Crisis

The contagion tests from Thailand to other emerging stock markets during the Asian "flu" crisis show that there is shift contagion from the crisis-originating market to the both Asian and Latin American regions. We can see that contagion is present in all Asian emerging stock markets under investigation. For Latin American stock markets, the contagion tests demonstrate the presence of contagion in Argentina, Brazil, Chile and Venezuela. Based on the increase in DCC mean in percentage term (See Table 9), Taiwan is most influenced by contagion in Asian region<sup>7</sup> and Venezuela in Latin American region.

In considering Hong Kong as the market originating Asian "flu" crisis instead of Thailand, we also find the presence of contagion effects in the both Asian and Latin American regions. However, the results are slightly different. For Asian emerging stock markets, the contagion effects are present in the Philippines, Singapore, Taiwan and Thailand, and not in Indonesia, Korea and Malaysia. For Latin American emerging stock markets, shift contagion phenomenon is found in most markets except Colombia.

<sup>7</sup> This result is consistent with the work of Cho and Parhizgari (2008).


**Table 8.** Results of contagion test in emerging stock markets: The Mexico "Tequila" crisis in 1994.

\*\*\* represents statistical significance at the 10% level of risk. N: No contagion; C: Contagion.

**Table 9.** Results of contagion test in emerging stock markets: The Asian "flu" crisis in 1997 (Contagion source: Thailand).


\*, \*\*\* represent statistical significance at the 1%, 10% levels of risk. N: No contagion; C: Contagion.

**Table 10.** Results of contagion test in emerging stock markets: Asian "flu" crisis in 1997 (Contagion source: Hong Kong).


\*\*\* represents statistical significance at the 10% level of risk. N: No contagion; C: Contagion.


**Table 11.** Results of contagion test in emerging stock markets: The US subprime crisis in 2007.

\*, \*\*, \*\*\* represent statistical significance at the 1%, 5%, 10% levels of risk. N: No contagion; C: Contagion.

### 5.2.3. Contagion during the US Subprime Crisis

As presented in Table 11, the DCCs between US and Asian emerging stock markets are generally smaller than those between US and Latin American emerging stock markets. Exceptionally, the DCCs for Philippines and Venezuela are very small compared to other markets, respectively about 5% and 1%. The highest DCC for Asian region is about 27% (for Singapore) while the highest DCC for Latin American region is more than 75% (for Mexico). However, they all show an increase after the crisis occurs. The t tests for the significant increases of DCCs between tranquil and turmoil periods lead to the rejection of non contagion for most of the markets, except Brazil. In fact, the DCCs between U.S. and Brazil increase after the crisis but it is not statistically significant. However, they are very high, respectively 71.34% and 71.46% in tranquil and crisis periods. This indicates an interdependence phenomenon between Brazil and US and not a shift contagion.
