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The aim of the paper is to analyze the transmission of shocks from selected developed and Southeastern European stock markets to the stock market of North Macedonia. Using the Bae, Karolyi, and Stulz (2003) co-exceedance methodology, we find that the probability of contagion from the stock markets of United States, Serbia and Bosnia and Herzegovina to the Macedonian stock market increased during the Global Financial Crisis. Regarding the asset classes, we show that contagion is positively associated with the volatility of Eurostoxx50 index, while negatively with the return of the euro dollar exchange rate and the yield of the 10-year US Treasury Note. The results have important implications for portfolio diversification and the asset allocation decisions of investors. [ABSTRACT FROM AUTHOR]

We present a framework focused on the interdependence of high‐dimensional tail events. This framework allows us to analyse and quantify tail interdependence at different levels of extremity, decompose it into systemic and residual part and to measure the contribution of a constituent to the interdependence of a system. In particular, tail interdependence can capture simultaneous distress of the constituents of a (financial or economic) system and measure its systemic risk. We investigate systemic distress in several financial datasets confirming some known stylized facts and discovering some new findings. Further, we devise statistical tests of interdependence in the tails and outline some additional extensions. [ABSTRACT FROM AUTHOR]

We develop a new approach to assess stock market contagion that involves examining whether higher unexpected volatility during extreme market downturns of the originating market is associated with increased return co-exceedance with the recipient market. Using daily data from 1999 to 2014 and quantile regressions with a wide set of control variables, we find evidence of contagion from the U.S. stock market to the six largest developed stock markets (Japan, United Kingdom, France, Germany, Hong Kong, and Canada). In addition, our results show that contagion is not solely a crisis-specific event, because we find contagion present over the whole sample period. Interestingly, the return co-exceedances during extreme market downturns are not driven by fundamentals, further supporting our results regarding contagion. [ABSTRACT FROM AUTHOR]

We examine whether there is contagion from the US stock market to six Central and Eastern European stock markets. We use a novel measure of contagion that examines whether volatility shocks in the US stock market coupled with negative returns are followed by higher co-exceedance between US and emerging stock markets. Using our approach and controlling for a set of market-related variables, we show that during the period from 1998 to 2014, financial contagion occurred, that is, unexpected negative events in the US market are followed by higher co-exceedance between US and Central and Eastern European stock markets. Even though contagion is stronger during the financial crisis, it also occurs in tranquil times. [ABSTRACT FROM AUTHOR]

This paper employs a co-exceedance approach to construct duration data that reflect the inter-arrival times of bond market extreme events. Conditional duration models that allow duration between distress events to depend linearly or nonlinearly on its past history are estimated and evaluated. We find evidence of strong persistence along with non-monotonic hazard rates. Further, we obtain statistical significant results when we allow duration to depend linearly on past information variables that capture global distress factors, country specific financial distress factors and assess the importance of flight-to-quality and liquidity factors. In addition, we find that mean duration levels of tranquility spells or equivalently the distress events intensity is subject to long run shifts that affect persistence evaluation and imply a co-movement in the tails of the distribution of short-run yield changes. When mean shifts are taken into account, duration persistence almost vanishes while the global distress factor and the liquidity measure no longer affect conditional duration. [ABSTRACT FROM AUTHOR]

ABSTRACT In this article, we use the extreme value theory framework to analyse contagion risk across the international banking system. We test for the likelihood that an extreme shock affecting a major, systemic global bank would also affect another large local or foreign counterpart, and vice versa. Our results reveal several key trends among major global banks: contagion risk among banks exhibits 'home bias', individual banks are affected differently by idiosyncratic shocks to their major counterparts and banks are affected differently by common shocks to the real economy or financial markets. In general, bank soundness seems more susceptible to common (macro and market) shocks when the global environment is turbulent; this may have important implications for global financial stability especially during stressful periods. Not surprisingly, our findings also suggest that bank contagion risk has risen over time, which emphasizes the need for continuing collaboration on cross-border supervision and crisis management. Copyright © 2012 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]