Kannan, PrakashKohler-Geib, Fritzi2012-03-192012-03-192009-07-01https://hdl.handle.net/10986/4188The 2007 subprime crisis in the United States has triggered a succession of financial crises around the globe, reigniting interest in the contagion phenomenon. Not all crises, however, are contagious. This paper models a new channel of contagion where the degree of anticipation of crises, through its impact on investor uncertainty, determines the occurrence of contagion. Incidences of surprise crises lead investors to doubt the accuracy of their information-gathering technology, which endogenously increases the probability of crises elsewhere. Anticipated crises, instead, have the opposite effect. Importantly, this channel is empirically shown to have an independent effect beyond other contagion channels.CC BY 3.0 IGOABSOLUTE VALUEADVANCED ECONOMIESASSET VALUESASSETSBANKSBOND RATEBOND SPREADSBOND YIELDBORROWINGCAPITAL FLOWSCONTRIBUTIONSCONTROL VARIABLESCOST OF FUNDSCOUNTRY FIXED EFFECTSCOUNTRY MARKETCOUNTRY RISKCOVARIANCE MATRIXCREDIT RATINGSCREDITORCREDITORSCRISIS COUNTRIESCRISIS COUNTRYCURRENCYCURRENCY CRISESDEBTDEBT DEFAULTDEPENDENT VARIABLEDERIVATIVEDEVALUATIONDEVELOPMENT ECONOMICSDIRECTION OF TRADEDISCLOSURE OF INFORMATIONDIVERSIFICATIONDOMESTIC BONDDOMESTIC MARKETDRIVERSECONOMIC CRISESECONOMIC MANAGEMENTECONOMIC POLICYECONOMIC RISKECONOMIC THEORYEFFICIENT MARKETSEMERGING ECONOMIESEMERGING MARKETEMERGING MARKET COUNTRIESEMERGING MARKETSEQUILIBRIUMEQUILIBRIUM PRICEEQUITY FUNDSERROR TERMEXCESS LIQUIDITYEXCHANGE RATEEXCHANGE RATE MECHANISMEXCHANGE RATESEXPLANATORY VARIABLEEXPLANATORY VARIABLESEXPOSUREFINANCE CORPORATIONFINANCIAL CRISESFINANCIAL CRISISFINANCIAL RISKFINANCIAL STABILITYFINANCIAL SUPPORTFINANCIAL VARIABLESFOREIGN INVESTMENTFOREIGN INVESTORFOREIGN INVESTORSFUND INVESTMENTSGLOBALIZATIONGLOBALIZATION OF SECURITIESGOVERNMENT BONDGOVERNMENT BOND YIELDGOVERNMENT BONDSGROUP OF INVESTORSGROWTH RATEHOLDINGIMPERFECT INFORMATIONINDIVIDUAL INVESTORINFORMATION ASYMMETRYINFORMATION DISCLOSUREINFORMATION PROCESSINGINFORMED INVESTORINFORMED INVESTORSINTEREST RATEINTEREST RATESINTERNATIONAL BANKINTERNATIONAL ECONOMICSINTERNATIONAL FINANCEINTERNATIONAL FINANCIAL CONTAGIONINTERNATIONAL FINANCIAL STATISTICSINTERNATIONAL MONEYINTERNATIONAL PORTFOLIOINTERPOLATIONINVESTINGINVESTMENT BANKINVESTMENT DECISIONSINVESTMENT PORTFOLIOSINVESTMENT TECHNOLOGYINVESTOR BEHAVIORINVESTOR UNCERTAINTYLIQUIDITYLONG-TERM INTERESTLONG-TERM INTEREST RATEMACROECONOMIC RISKSMARKET PARTICIPANTSMARKET RETURNSMARKET SIZEMARKET VALUEMONETARY FUNDMORTGAGEMORTGAGE MARKETMOTIVATIONMUTUAL FUNDSNET ASSETOUTPUTPARTICULAR COUNTRYPOLITICAL RISKPOLITICAL RISKSPORTFOLIOPORTFOLIO HOLDINGSPOVERTY REDUCTIONPRIVATE CAPITALPRIVATE CAPITAL INFLOWSPROBABILITYPURCHASESRANDOM VARIABLESRATE OF RETURNREGIONAL CRISESREGIONAL SHOCKRETURNRISK AVERSIONRISK FACTORSRISK-FREE RETURNROBUSTNESS CHECKSALESSECURITIESSECURITIES MARKETSSECURITY MARKETSOCIAL VALUESOVEREIGN DEBTSPECULATIVE ATTACKSSTANDARD DEVIATIONSTANDARD DEVIATIONSSTOCK MARKETSTOCK MARKET INDEXSTOCK MARKET INDICESSTOCK MARKET VOLATILITYSTOCK MARKETSSTOCK RETURNSTERMINATIONTIME HORIZONTOTAL EXPORTSTRADE SHARETRADE SHARESTRADE STATISTICSTRANSPARENCYUNINFORMED INVESTORUNINFORMED INVESTORSWEALTH EFFECTSWORTHWorld Bank10.1596/1813-9450-4995