Analysis Of Sub-prime Loan Crisis Contagion Based On Change-point Testing Method Of FIDC Model

Most existing literatures study long memory properties in the return of one single market or the dependence structure between two markets, but none of them studies the two problems together. Unlike them, this paper focuses on the long memory effects in the tail dependence of different international stock markets. The topic is important because the existence of long memory effects invalidates market efficiency hypothesis. And understanding the long memory dynamics in tail dependence is useful to capture cross-market dependence and alert for the crisis contagion. We improve the existing model and use this new model to analyze the dependence structure between Chinese, Japanese, German, French stock markets and American stock market from the change-point view individually to capture the long memory property of the tail dependence. Our results show that the improved model is stable for different stock markets, and the first change-point and the second change-point are in accordance with the ending time and the beginning time of the subprime crisis. Tail correlation increases significantly during the crisis contagion period, and its long memory is stronger than that of the other two periods.