Insights into the Development of the Global Financial Crisis - A Tale of Contagion and Market Interdependence

This paper investigates the presence of market interdependence and contagion during the 2007-2009 crisis. For this purpose, five aggregate indices were employed, covering all the major financial markets from each geographical region. The data series were analyzed by means of the values and value changes of the correlation coefficients (both unconditional and conditional) and also with the aid of a spillover index. The results indicate that there is evidence for both interdependence and contagion during the recent financial crisis. Moreover, it seems that the crisis led to a further increase of the global financial integration.