Correlation Analysis of Financial Contagion: What One Should Know Before Running a Test

Korea

Hong Kong

Malaysia

Singapore

Indon.

Thail.

Philip.

Fig. 2c - Stock market covariance of weekly returns

(Asia vs. USA and Japan; 3 month exponential moving average)

USA

0.20 -∣----------------------- 0.15 :      u 0∙05-   "     .	ʌ. .Λ
0.00--4------43—4√'*'T V-T --v --- --------f* J QO—ΓT l '----------- 0.05      ....................................................................................................................

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

0.175 - 0.150 - 0.125 - 0.100 - 0.075 - 0.050 - 0.025 -		v. ʌ		A					yκ
						d
0.000 -
0.025 -	Iiiiiiiiiiiiiiiiiiiiiiiiiiiii	Iiiiiiiiiiii	Iiiiiiiiiiii	τπττπτ	Iiiiiiiiiiiiiiiiiiiiiiiiiiiiiii		Iiiiiiiiiiiii		Iiiiiiiiiiii

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

0.210

0.180

0.150

0.120

0.090

0.060

0.030

0.000

-0.030

0.200

0.1/5

0.15⁰

0.125

0.1⁰⁰

0.0/5

0.0⁵⁰

0.025

0.0⁰⁰

-0.025

0.30

0.25

0.20

0.15

0.10

0.05

0.00

-0.05

-0.10

πππππwιτιrιτιτιrππι

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

7τττττττττττπππττππττπππττππττr

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

0.15

0.10

0.05

0.00

-0.05

j Iiiiiiiiiiiiiiiiiiiiiiiiiiiii Iiiiiiiiiii iiiii

.W ιιιιιιι iiiiiiii ιιmττ∏τττ∏ττm∏ιι Iiiiii Ii Iiiiiiiiii Iiiiiiiiiii

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

Iiiiiiiiiiiiiiiiiiiiiiiiiiiii Iiiiiiiiiii Iiiiiiiiiiii iiiiiiii Iiiiiiiiiiiiiiiiiiiiiii iiiiiiiii Iiiiiiiiii Iiiiiiiiiii

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

0.30

0.25

0.20

0.15

0.10

0.05

0.00

-0.05

-0.10

Japan

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

0.20

0.15

0.10

0.05

0.00

-0.05

0.20

0.15

0.10

0.05

0.00

-0.05

0.18

0.12

0.06

0.00

-0.06

-0.12

0.25

0.20

0.15

0.10

0.05

0.00

-0.05

-0.10

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

TnTTTTTTTTTTwillllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllllIIIIII

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

ττττττ∏τττnττττnτττττmτt

ι≡m∏≡

0.150

0.125

0.100

0.075

0.050

0.025

0.000

-0.025

-0.050

	(4 A^Λ aλ /
j Iiiiiiiiiiiiiiiiiiiiiiiiiiiii Iiiiiiiiiii Iiiiiiiiiiiiπn≡Iiiiiiiiiiiiiiiiiiiiiiiπ≡Ttiiiiiiiiii Iiiiiiiiiii

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

0.20

0.15

0.10

0.05

0.00

-0.05

-0.10

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999