Stock Market Interdependence, Contagion, the Financial Subprime Crisis and the European Sovereign Debt Crisis: Evidence from the Chinese’s Stock Market

Main Article Content

Selma Jayech
Lamia Jaidane Mazigh
Emna Abdennadher


This study analyses the contagion effects of the American, the British and the Greek stock markets on the Chinese stock market in the context of the 2007–2010 American and European financial crises. Two contagion tests have been performed using the Archimedean copula functions. The results of the first test suggest that the financial contagion existed between UK/China in the 2007 subprime financial crisis period and between U.S./China and U.K./China in the 2010 European sovereign debt crisis period. Finally, the second test shows that the contagion effects of the 2010 European sovereign debt crisis were clearly more intense than those caused by the 2007 subprime financial crisis just for the U.S./China pair. Investors' sentiment and behavior indirectly have impact on financial risk contagion in Chinese stock markets.

Article Details

How to Cite
Stock Market Interdependence, Contagion, the Financial Subprime Crisis and the European Sovereign Debt Crisis: Evidence from the Chinese’s Stock Market. (2022). Asian Academy of Management Journal of Accounting and Finance, 18(2), 109–138.


Abdennadher, E., & Helara, S. (2021). Volatility spillovers and contagion between stock markets. International Journal of Business, 4(1), 1–8.

Abdennadher, E., & Hellara, S. (2018). Causality and contagion in emerging stock markets. Borsa Istanbul Review, 18(4), 300–311.

Agénor, P.-R., & Aizenman, J. (1998). Contagion and volatility with imperfect credit markets. Staff Papers, 45(2), 207–235.

Ahmad, W., Sehgal, S., & Bhanumurthy, N. R. (2013). Eurozone crisis and BRIICKS stock markets: Contagion or market interdependence? Economic Modelling, 33, 209–225.

Aloui, R., Aïssa, M. S. Ben, & Nguyen, D. K. (2011). Global financial crisis, extreme interdependences, and contagion effects: The role of economic structure? Journal of Banking & Finance, 35(1), 130–141.

Aloui, R., Hammoudeh, S., & Nguyen, D. K. (2013). A time-varying copula approach to oil and stock market dependence: The case of transition economies. Energy Economics, 39, 208–221.

Arghyrou, M. G., & Kontonikas, A. (2012). The EMU sovereign-debt crisis: Fundamentals, expectations and contagion. Journal of International Financial Markets, Institutions and Money, 22(4), 658–677.

Baig, T., & Goldfajn, I. (1999). Financial market contagion in the Asian crisis. IMF Staff Papers, 46(2), 167–195.

Banerjee, A. V. (1992). A simple model of herd behavior. The Quarterly Journal of Economics, 107(3), 797–817.

Baur, D. G. (2013). The structure and degree of dependence: A quantile regression approach. Journal of Banking & Finance, 37(3), 786–798.

Beirne, J., & Fratzscher, M. (2013). The pricing of sovereign risk and contagion during the European sovereign debt crisis. Journal of International Money and Finance, 34, 60–82.

Bekaert, G., Harvey, C. R., Lundblad, C. T., & Siegel, S. (2011). What segments equity markets? The Review of Financial Studies, 24(12), 3841–3890.

Bianconi, M., Yoshino, J. A., & De Sousa, M. O. M. (2013). BRIC and the US financial crisis: An empirical investigation of stock and bond markets. Emerging Markets Review, 14, 76–109.

Billio, M., & Pelizzon, L. (2003). Volatility and shocks spillover before and after EMU in European stock markets. Journal of Multinational Financial Management, 13(4–5), 323–340.

Calvo, G. A., & Mendoza, E. G. (2000). Rational contagion and the globalization of securities markets. Journal of International Economics, 51(1), 79–113.

Caramazza, F., Ricci, L., & Salgado, R. (2004). International financial contagion in currency crises. Journal of International Money and Finance, 23(1), 51–70.

Changqing, L., Chi, X., Cong, Y., & Yan, X. (2015). Measuring financial market risk contagion using dynamic MRS-Copula models: The case of Chinese and other international stock markets. Economic Modelling, 51, 657–671.

Chen, C., Iyengar, G., & Moallemi, C. C. (2014). Asset-based contagion models for systemic risk. Working paper, Colombia Business School.

Cheung, W., Fung, S., & Tsai, S.-C. (2010). Global capital market interdependence and spillover effect of credit risk: evidence from the 2007–2009 global financial crisis. Applied Financial Economics, 20(1–2), 85–103.

Chudik, A., & Fratzscher, M. (2011). Identifying the global transmission of the 2007–2009 financial crisis in a GVAR model. European Economic Review, 55(3), 325–339.

Claeys, P., & Vaší?ek, B. (2014). Measuring bilateral spillover and testing contagion on sovereign bond markets in Europe. Journal of Banking & Finance, 46, 151–165.

Clayton, D. G. (1978). A model for association in bivariate life tables and its application in epidemiological studies of familial tendency in chronic disease incidence. Biometrika, 65(1), 141–151.

Cook, R. D., & Johnson, M. E. (1981). A family of distributions for modelling non?elliptically symmetric multivariate data. Journal of the Royal Statistical Society: Series B (Methodological), 43(2), 210–218.

Da Fonseca, J., & Ignatieva, K. (2018). Volatility spillovers and connectedness among credit default swap sector indexes. Applied Economics, 50(36), 3923–3936.

Dias, A., & Embrechts, P. (2004). Dynamic copula models for multivariate high-frequency data in finance. Manuscript, ETH Zurich, 81.

Dimitriou, D., Kenourgios, D., & Simos, T. (2013). Global financial crisis and emerging stock market contagion: A multivariate FIAPARCH–DCC approach. International Review of Financial Analysis, 30, 46–56.

Dornbusch, R., Park, Y. C., & Claessens, S. (2000a). Contagion: How it spreads and how it can be stopped. World Bank Research Observer, 15(2), 177–197.

Dornbusch, R., Park, Y. C., & Claessens, S. (2000b). Contagion: Understanding how it spreads. The World Bank Research Observer, 15(2), 177–197.

Dungey, M., & Gajurel, D. (2014). Equity market contagion during the global financial crisis: Evidence from the world’s eight largest economies. Economic Systems, 38(2), 161–177.

Dungey, M., Fry, R., González-Hermosillo, B., & Martin, V. L. (2005). Empirical modelling of contagion: a review of methodologies. Quantitative Finance, 5(1), 9–24.

Eichengreen, B., Rose, A. K., & Wyplosz, C. (1996). Contagious currency crises. Cambridge, MA: National Bureau of Economic Research.

Elkhaldi, A., & Abelfatteh, Y. B. (2014). Testing herding effects on financial assets pricing: The case of the Tunisian stock market. French Journal of Scientific and Educational Research, 2(12), 180–192.

Elkhaldi, A., Chebbi, T., & Naoui, K. (2014). Measuring contagious effects on Euro area debt crisis using daily CDS spreads changes. Procedia Economics and Finance, 13, 14–29.

Elkhaldi, Abderrazek, & Daadaa, W. (2015). Economic determinants of corporate capital structure: The case of Tunisian firms. International Journal of Economics and Finance, 7(9), 193–199.

Engle, R. F. (1982). Autoregressive conditional heteroscedasticity with estimates of the variance of United Kingdom inflation. Econometrica, 50, 987–1007.

Forbes, K. J., & Rigobon, R. (2002). No contagion, only interdependence: measuring stock market comovements. The Journal of Finance, 57(5), 2223–2261.

Forbes, K., & Rigobon, R. (2000). Contagion in Latin America: Definitions, measurement, and policy implications. Cambridge, MA: National Bureau of Economic Research.

Frank, M. J. (1979). On the simultaneous associativity of F(x, y) and x + y ? F(x, y). Aequationes Mathematicae, 19(1), 194–226. BF02189866

Fry, R., Martin, V. L., & Tang, C. (2010). A new class of tests of contagion with applications. Journal of Business & Economic Statistics, 28(3), 423–437.

Gallegati, M. (2012). A wavelet-based approach to test for financial market contagion. Computational Statistics & Data Analysis, 56(11), 3491–3497.

Genest, C., & MacKay, J. (1986). The joy of copulas: Bivariate distributions with uniform marginals. The American Statistician, 40(4), 280–283.

Gerlach, S., & Smets, F. (1995). Contagious speculative attacks. European Journal of Political Economy, 11(1), 45–63.

Ghorbel, A., & Trabelsi, A. (2009). Measure of financial risk using conditional extreme value copulas with EVT margins. Journal of Risk, 11(4), 51.

Glick, R., & Hutchison, M. (2013). China’s financial linkages with Asia and the global financial crisis. Journal of International Money and Finance, 39, 186–206.

Glick, R., & Rose, A. K. (1999). Contagion and trade: why are currency crises regional? Journal of International Money and Finance, 18(4), 603–617.

Goldstein, I., & Pauzner, A. (2004). Contagion of self-fulfilling financial crises due to diversification of investment portfolios. Journal of Economic Theory, 119(1), 151–183.

Gómez-Puig, M., & Sosvilla-Rivero, S. (2016). Causes and hazards of the euro area sovereign debt crisis: Pure and fundamentals-based contagion. Economic Modelling, 56, 133–147.

Gorea, D., & Radev, D. (2014). The euro area sovereign debt crisis: Can contagion spread from the periphery to the core? International Review of Economics & Finance, 30, 78–100.

Haile, F., & Pozo, S. (2008). Currency crisis contagion and the identification of transmission channels. International Review of Economics & Finance, 17(4), 572–588.

Hamao, Y., Masulis, R. W., & Ng, V. (1990). Correlations in price changes and volatility across international stock markets. The Review of Financial Studies, 3(2), 281–307.

Hemche, O., Jawadi, F., Maliki, S. B., & Cheffou, A. I. (2016). On the study of contagion in the context of the subprime crisis: A dynamic conditional correlation–multivariate GARCH approach. Economic Modelling, 52, 292–299.

Horta, P. (2013). Contagion effects in the European NYSE Euronext stock markets in the context of the 2010 sovereign debt crisis. Investment Management and Financial Innovations, 10(4), 114–124.

Horta, P., Lagoa, S., & Martins, L. (2014). The impact of the 2008 and 2010 financial crises on the Hurst exponents of international stock markets: Implications for efficiency and contagion. International Review of Financial Analysis, 35, 140–153.

Horta, P., Mendes, C., & Vieira, I. (2010). Contagion effects of the subprime crisis in the European NYSE Euronext markets. Portuguese Economic Journal, 9(2), 115–140.

Jayech, S. (2016). The contagion channels of July–August-2011 stock market crash: A DAG-copula based approach. European Journal of Operational Research, 249(2), 631–646.

Jayech, S., & Zina, N. B. (2012). Measuring financial contagion in the stock markets using a copula approach. International Journal of Data Analysis Techniques and Strategies, 4(2), 154–180.

Jeanne, O. (1997). Are currency crises self-fulfilling? A test. Journal of International Economics, 43(3–4), 263–286.

Jebran, K., Chen, S., Ullah, I., & Mirza, S. S. (2017). Does volatility spillover among stock markets varies from normal to turbulent periods? Evidence from emerging markets of Asia. The Journal of Finance and Data Science, 3(1–4), 20–30.

Jin, X., & An, X. (2016). Global financial crisis and emerging stock market contagion: A volatility impulse response function approach. Research in International Business and Finance, 36, 179–195.

Joe, H. (1997). Multivariate models and multivariate dependence concepts. Chapman and Hall/CRC.

Jung, R. C., & Maderitsch, R. (2014). Structural breaks in volatility spillovers between international financial markets: Contagion or mere interdependence? Journal of Banking & Finance, 47, 331–342.

Kaminsky, G. L., & Reinhart, C. M. (1999). The twin crises: the causes of banking and balance-of-payments problems. American Economic Review, 89(3), 473–500.

Kenourgios, D. (2014). On financial contagion and implied market volatility. International Review of Financial Analysis, 34, 21–30.

Kenourgios, D., & Dimitriou, D. (2015). Contagion of the Global Financial Crisis and the real economy: A regional analysis. Economic Modelling, 44, 283–293.

Kenourgios, D., & Padhi, P. (2012). Emerging markets and financial crises: regional, global or isolated shocks? Journal of Multinational Financial Management, 22(1–2), 24–38.

Kenourgios, D., Christopoulos, A. G., & Dimitriou, D. I. (2013). Asset markets contagion during the global financial crisis. Multinational Finance Journal, 17(1/2), 49–76.

Kenourgios, D., Samitas, A., & Paltalidis, N. (2011). Financial crises and stock market contagion in a multivariate time-varying asymmetric framework. Journal of International Financial Markets, Institutions and Money, 21(1), 92–106.

Kim, W., & Wei, S.-J. (2002). Foreign portfolio investors before and during a crisis. Journal of International Economics, 56(1), 77–96.

Kim, Y., Li, H., & Li, S. (2014). Corporate social responsibility and stock price crash risk. Journal of Banking & Finance, 43, 1–13.

Kimeldorf, G., & Sampson, A. R. (1989). A framework for positive dependence. Annals of the Institute of Statistical Mathematics, 41(1), 31–45.

Lee, W. S., & Lee, H. S. (2021). Asymmetric volatility transmission across Northeast Asian stock markets. Borsa Istanbul Review, 22(2), 341–351.

Liu, Z., Zhou, Y., & Zhou, Z. (2019). International financial contagion during the subprime crisis: Evidence from UK financial markets. In I. Venezia (Ed.), Behavioral finance: The coming of age (pp. 245–284). World Scientific.

Longstaff, F. A. (2010). The subprime credit crisis and contagion in financial markets. Journal of Financial Economics, 97(3), 436–450.

Luchtenberg, K. F., & Vu, Q. V. (2015). The 2008 financial crisis: Stock market contagion and its determinants. Research in International Business and Finance, 33, 178–203.

Masson, M. P. R. (1998). Contagion: Monsoonal effects, spillovers, and jumps between multiple equilibria. International Monetary Fund.

Masson, P. (1999). Contagion: Macroeconomic models with multiple equilibria. Journal of International Money and Finance, 18(4), 587–602.

Metiu, N. (2012). Sovereign risk contagion in the Eurozone. Economics Letters, 117(1), 35–38.

Morales, L., & Andreosso-O’Callaghan, B. (2012). The current global financial crisis: Do Asian stock markets show contagion or interdependence effects? Journal of Asian Economics, 23(6), 616–626.

Morgan Stanley (2008). Annual report on form 10-K.

Nelsen, C. J., Murtaugh, M. P., & Faaberg, K. S. (1999). Porcine reproductive and respiratory syndrome virus comparison: divergent evolution on two continents. Journal of Virology, 73(1), 270–280.

Pais, A., & Stork, P. A. (2011). Contagion risk in the Australian banking and property sectors. Journal of Banking & Finance, 35(3), 681–697.

Pham, C. D. (2020). Is estimating the Capital Asset Pricing Model using monthly and short- horizon data a good choice? Heliyon, 6(7), e04339.

Phuoc, L. T., Kim, K. S., & Su, Y. (2018). Reexamination of estimating beta coecient as a risk measure in CAPM. The Journal of Asian Finance, Economics, and Business, 5(1), 11–16.

Pomfret, R. (2014). The economies of central Asia. Princeton University Press.

Pritsker, M. (2001). The channels for financial contagion. In S. Claessens, & K. J. Forbes (Eds.), International financial contagion (pp. 67–95). Springer.

Rigobon, R. (1999). On the measurement of the international propagation of shocks. National Bureau of Economic Research Cambridge, Mass., USA.

Samitas, A., & Tsakalos, I. (2013). How can a small country affect the European economy? The Greek contagion phenomenon. Journal of International Financial Markets, Institutions and Money, 25, 18–32.

Serra, R. G., & Martelanc, R. (2013). Estimation of betas of stocks with low liquidity. Brazilian Business Review, 10(1), 49–78. bbr.2013.10.1.3

Shen, P.-L., Li, W., Wang, X.-T., & Su, C.-W. (2015). Contagion effect of the European financial crisis on China’s stock markets: Interdependence and pure contagion. Economic Modelling, 50, 193–199.

Shiller, R. J. (1995). Conversation, information, and herd behavior. The American Economic Review, 85(2), 181–185.

Trivedi, P. K., & Zimmer, D. M. (2005). Copula modelling: An introduction for practitioners, foundations and trends. Hanover, MA: Now Publishers.

Van Rijckeghem, C., & Weder, B. (2001). Sources of contagion: is it finance or trade? Journal of International Economics, 54(2), 293–308.

Wang, Y., Jodoin, P.-M., Porikli, F., Konrad, J., Benezeth, Y., & Ishwar, P. (2014). CDnet 2014: An expanded change detection benchmark dataset. Proceedings of the IEEE Conference on Computer Vision and Pattern Recognition Workshops, 387–394.

Wen, X., Wei, Y., & Huang, D. (2012). Measuring contagion between energy market and stock market during financial crisis: A copula approach. Energy Economics, 34(5), 1435–1446.

Yamamoto, S. (2014). Transmission of US financial and trade shocks to Asian economies: Implications for spillover of the 2007–2009 US financial crisis. The North American Journal of Economics and Finance, 27, 88–103.

Ye, W., Liu, X., & Miao, B. (2012). Measuring the subprime crisis contagion: Evidence of change point analysis of copula functions. European Journal of Operational Research, 222(1), 96–103.

Zouhair, M., Lanouar, C., & Ajmi, A. N. (2014). Contagion versus interdependence: The case of the BRIC countries during the subprime crises. In M. Arouri, S. Boubaker, & D. Nguyen (Eds.), Emerging markets and the global economy (pp. 555–582). Elsevier.