We are very grateful to an anonymous referee for many helpful comments and to the editor John Doukas for very useful suggestions. Moreover, we would like to thank Yakov Amihud, Douglas Cumming, Wenxuan Hou, Randy Priem, Marcel Tyrell as well as the participants of the EFM Alternative Investments Conference 2011 and Campus for Finance 2011 for helpful comments and suggestions. We also thank Kay Homann from Börse Hamburg for providing access to their databases and Pascal Noel for excellent research assistance. All remaining errors are our own.
What Drives Contagion in Financial Markets? Liquidity Effects versus Information Spill-Over
Version of Record online: 27 AUG 2013
© 2013 John Wiley & Sons Ltd
European Financial Management
Volume 20, Issue 3, pages 548–573, June 2014
How to Cite
Haß, L. H., Koziol, C. and Schweizer, D. (2014), What Drives Contagion in Financial Markets? Liquidity Effects versus Information Spill-Over. European Financial Management, 20: 548–573. doi: 10.1111/j.1468-036X.2013.12011.x
- Issue online: 17 JUN 2014
- Version of Record online: 27 AUG 2013
- financial contagion;
- information spill-over;
- open-ended property funds
The objective of this paper is to study how contagion works in financial markets by identifying the mechanisms which drive the spill-over of shocks from one market to other markets. To address this question we use open-ended property funds (OPFs) as they offer a unique institutional setting which allows separating between liquidity and information spill-over. We find that that liquidity risk captures the observed discounts very well when the danger of potential future impairments is low. Once the impending NAV impairments become very likely, also this component matters and attributes for a fraction of the total discount.