We investigate the link between extreme events on the currency and stock markets for 26 countries by estimating a simultaneous equations probit model, using a sample of 2500 daily returns in the period from 1996 to 2005. In a number of emerging markets that went through a period of crisis an extreme stock market decline increased the probability of extreme currency depreciation on the same day. For currency markets we find evidence of spillover of extreme events within regions, but limited influence outside the region. Extreme events on stock markets are much more interrelated globally, particularly when they originate from the US.
© 2006 Elsevier Ltd. All rights reserved.
Authors: Cumperayot, P., Keijzer, T. & Kouwenberg, R. (2006)
Publication info: Journal of International Money & Finance, 2006, 25, pp.528-550.
Impact Factor: 0.709
Keywords: Currency market; Extreme events; Spillover; Stock market
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