Spillover Effects from China and the Us to Global Emerging Markets : A Dynamic Analysis

This paper contributes to the literature on financial contagion by assessing dynamic spillover effects from two key markets (China and the U.S.) to six major emerging economies from different regions, using wavelet analysis to differentiate contagion from market interdependence. Few studies distinguish between the sources of transmission of shocks and their effects on different emerging markets when analysing contagion phenomenon. Additionally, wavelet analyses used in financial contagion studies do not connect univariate and multivariate wavelet analyses to distinguish contagion from market interdependence. Based on the paper's results on univariate wavelet decomposition, cycles between 2 to 4 days account for the most significant variance in stock returns of advanced and emerging economies. Moreover, the results of the multivariate wavelet analysis support the presence of market interdependence between advanced and emerging markets during selected crisis periods