Joint Tests of Contagion with Applications to Financial Crises

Joint tests of contagion are derived which are designed to have power where contagion
operates simultaneously through coskewness, cokurtosis and covolatility. Finite sample
properties of the new tests are evaluated and compared with existing tests of contagion
that focus on a single channel. Applying the tests to daily Eurozone equity returns from
2005 to 2014 shows that contagion operates through higher order moment channels
during the GFC and the European debt crisis, which are not necessarily detected by
traditional tests based on correlations.