**6. Conclusions**

Since the international financial crises that occurred in the last two decades, there have been a variety of papers that investigate whether contagion risk is present in financial markets during the crisis periods. In fact, as observed in reality, financial shocks in one country have important impacts in other countries. This raises the question about the role of contagion in the literature. However, how to define and measure contagion is still a contentious problem.

In this paper, we use a traditional definition of contagion which indicates it as a significant increase in cross-market linkages after a shock to one country. Hence, the method applied to test for the existence of contagion in stock markets under investigation is to test if the correlations increase significantly after the crisis. The increase of cross-market correlations is the evidence of contagion risk. This approach is used in many works that deals with the problem of financial contagion risk as it is rather simple compared to other methods like including dummy variables.

We study contagion effects in emerging stock markets during the 1994 Mexican crisis, the 1997 Asian crisis and the 2007 US crisis. The sample consists of eight emerging stock markets in Asia (Indonesia, Hong Kong, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand), and six markets in Latin America (Argentina, Brazil, Chile, Colombia, Mexico, Venezuela) and the US stock market. To compute conditional correlations across markets, we apply DCC-GARCH(1,1) to daily stock index returns of all the markets in the sample for three crises. We then test for a significant increase in means of dynamic conditional correlations of target markets with source markets during crisis periods.

We find evidence for contagion risk in emerging stock markets during three crises. However, there is a difference of degree of spread among these crisis. During the Mexican crisis, there is a shift contagion from Mexico to two other markets in the same region (Argentina and Chile, all at 1%). During the Asian crisis, contagion is not only detected in Asian region but also in Latin American region. If considering Thailand as contagion source, we find evidence for contagion from Thailand to Indonesia, Hong Kong, Korea, Malaysia, Philippines, Singapore, Taiwan and Thailand (in Asia) and Argentina, Brazil, Chile, Venezuela (in Latin America), all at 1% except for Hong Kong (10%). Alternatively, if we assume that the Asian crisis was triggered by the crash of Hong Kong stock market, the results show that Philippines, Singapore, Taiwan and Thailand (in Asia) and Argentina, Brazil, Chile, Mexico, Venezuela (in Latin America) suffer contagion effects from Hong Kong, all at 1%. With respect to the US subprime crisis, we can detect support for contagion in all studied markets at 1% apart from Brazil. This confirms once again the undeniable impact of US stock market to emerging stock markets.

Among three studied crises, only the Mexican crisis in 1994 is found to be a regional phenomenon. However, this crisis occurred more than twenty years ago, when these countries had just begun their liberalization processes. Afterward, the financial crises became more contagious. Regarding the Asian crisis in 1997, contagion is also detected in the Asian and Latin American regions. The US subprime crisis in 2007 is found to be the most contagious as contagion is detected in most of studied markets in both Asian and Latin American regions. Thereby, the contagion effect seems evident in emerging stock markets in the context that these countries become more open and integrated in the global economy after their liberalization processes.

In summary, in this paper, shift contagion in emerging stock markets during crisis periods has been found present. As a result, the most important element that causes contagion effects across markets is the behavior of investors. In the literature of contagion, a shock to one market can make changes in the anticipations of investors in other markets, and hence lead to portfolio rebalancing. In the presence of information asymmetry, this may transfer the crisis to other markets. Consequently, this can be a subject for more detailed researches in the future. Besides, this paper still presents some shortcomings. The main problem of this study concerns the definition of contagion. In this paper, we consider the contagion as an increase of correlation between the markets. Moreover, we apply a simple method to detect the contagion. We use one side *t*-test instead of other persistent measures. Therefore, these problems must be further examined in the future.

**Funding:** This research received no external funding

**Conflicts of Interest:** The author declares no conflict of interest.
