Measuring and detecting financial contagion - increased linkage and increased volatility transmission between markets during crisis times - is an important topic for both investors and policymakers. Forbes and Rigobon (2002) test based on the change in correlation of assets is one of the simplest and foundational tests for financial contagion. Today we discuss the concepts behind the Forbes and Rigobon test, its econometric specification, and implementation in Excel based on real-world data.
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4 сен 2024