One example of political link is the following. Therefore, crises tend to be clustered. A crisis in one country is followed by crises elsewhere. When fundamentals and commons shocks do not fully explain the relationship among countries, spillover effects have been attributed to herding behavior, either rational or irrational. The literature has emphasized that asymmetric information is at the root of these market reactions.
Information is costly so investors remain uniformed about the countries in which they invest.
Therefore, investors try to infer future price changes based on how the rest of the market is reacting. The relatively uninformed investors follow the supposedly informed investors. So all the market moves jointly. Moreover, investors reassess the risks of investing abroad when they see a foreign crisis. In this context, a change in Thailand's asset prices might be useful information about future price changes in Indonesia or Brazil.