Why is no financial crisis a dress rehearsal for the next? Exploring contagious heterogeneities across major Asian stock markets

• Our study discover contagion in the Asian equity markets during eleven major crises.
• We use wavelet decomposition in its discrete and continuous forms.
• We find that most of the shocks were transmitted via excessive linkages.
• The recent subprime crisis has revealed fundamentals-based contagion.
• We find the dominant role of China and South Korea.

Our study attempts to discover pure contagion or interdependence amongst the Asian equity markets (China, India, Taiwan and South Korea) due to the shocks stemming from eleven major crises around the world. We apply wavelet decomposition in both its discrete and continuous forms to unveil the multi-horizon nature of co-movement, volatility and lead–lag relationship. We find that most of the earlier shocks were transmitted via excessive linkages or pure contagion, while the recent subprime crisis appears to have resulted mostly in fundamentals-based contagion or interdependence. This assertion is based mainly on the deepening fundamental integration particularly after the Asian financial crisis period. We also find the relatively dominating role of China and South Korea after this crisis.