On 25th Dec, 2o17, IEF hold a seminar at room 117, Weiyu Building. Dr. Zhou Zhiping from strategic asset allocation department, Ping An insurance gave us a talk entitled " International financial contagion during the subprime crisis: Evidence from UK financial markets".
Dr. Zhou investigates the contagion dynamics from the US low grade asset-backed securities (ABS) market to UK financial markets during the 2007 subprime mortgage crisis, and identifies the contagion channels using both a single-state vector autoregressive model and a Markov switching vector autoregressive model. He shows that a shock to the US low grade ABS market generates a significant and persistent effect on the yields of UK financial assets, which demonstrates the existence of contagion. Moreover, contagion episodes mainly occur during periods of financial crisis. Dr. Zhou also finds that the contagion effects of the US lower grade ABS market are transmitted to UK financial markets through a number of channels, including flight to liquidity, risk premium, flight to quality and correlated information.
After the seminar, the teachers and students had great discussions with Dr. Zhou on issues like large asset allocation.