Detecting financial contagion: Forbes and Rigobon test explained (Excel)

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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You can find the spreadsheets for this video and some additional materials here: drive.google.com/drive/folders/1sP40IW0p0w5IETCgo464uhDFfdyR6rh7
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[@eTaupe]

Gosh... Si good videos. I wish the same for co-kurtosis. Maybe you already made them.

[@andymaclean1872]

Excellent and helpful video. Expanding to include co-skew and co-kurtosis would be very helpful. Thanks

[@stephenhobbs948]

Which stock and bond indexes are you using? I used SPY and SHV, and my numbers are very different. The indexes/ETFs are not in the linked spreadsheet. Thanks for the videos.

[@Gggggggggg1545.7]

What about moving from daily to weekly returns? I feel like daily returns adds too much noise pulling correlations down