One of the more interesting questions in the international finance literature is how to model the propagation of a financial extreme episodes. This paper will study daily stock market indexes from major international stock exchanges using spatio-temporal statistics to investigate the issue of contagion in financial markets. We will use a joint multidimensional scaling and spatio-temporal geostatistical approach to analyze 25 international stock indexes. We pay special attention to the concept of “distance” in financial markets framework and we construct financial maps with multidimensional scaling that will be further modeled with the most sophisticated spatio-temporal covariance functions, which represent the spatio-temporal dependencies of daily stock market indexes.

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