Contagion effects in selected European capital markets during the financial crisis of 2007–2009

The empirical research that is presented here deals with the process of contagion in selected capital markets during the financial crisis of 2007–2009. The values of stock market indices provide the most concise information about the situation in the capital market (the German Dax, the French CAC, the British FTSE100 and the Polish WIG20). The definition of contagion which has been adopted here and which is verified by using cospectral analysis assumes that contagion amounts to a significant intensification of lagged reactions (i.e. a phase shift of selected harmonic components). This approach does not assume that frequencies are divided into high and low bands according to a predetermined schema, which means that this division can be different for each pair of the analysed markets. The research that was carried out indicates that rates of return in the studied European markets react simultaneously to a much greater extent as a result of interdependencies than as a result of mutual contagion.

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