Impact of global financial crisis on network of Asian stock markets

Abstract

This study examines the network dynamics of fourteen Asian Stock Markets (ASMs) in three phases (pre, during, and post) of financial crisis of 2008. Based on network statistics, I find that ASMs network is more interconnected during the crisis period than pre-and post-crisis period. Furthermore, using the Minimum Spanning Tree (MST) diagram, I find that the stock markets of Hong Kong, Japan, Korea, and India play a significant role in these networks and any shock to these markets can lead to contagion. The trade and the interest rate differential are the major driving forces behind these linkages. This work has practical implications as it provides insight on portfolio diversification during the crisis period and can also be used in anticipating the route of crisis.