1990/01/01 by Mervyn King, Sushil Wadhwani · 1 citation
Economics, Econometrics and Finance · #Market Dynamics and Volatility #Financial Markets and Investment Strategies #Monetary Policy and Economic Impact #Stock (firearms) #Volatility (finance) #Economics #Financial economics #Economic history #History #Archaeology
paper · doi:10.1093/rfs/3.1.5
openalex publication_date 1990/01/01 · openalex created_date 2025/10/10 · openalex updated_date 2026/08/05
This article investigates why, in October 1987, almost all stock markets fell together despite widely differing economic circumstances. We construct a model in which “contagion” between markets occurs as a result of attempts by rational agents to infer information from price changes in other markets. This provides a channel through which a “mistake” in one market can be transmitted to other markets. We offer supporting evidence for contagion effects using two different sources of data.