In this paper, we provide an assessment of stock market contagion based on the multivariate GARCH-in-VAR model, where the mean equation of VAR involves conditional volatility. Our specification of GARCH-in-VAR can detect cross-market linkages by the risk-toreturn volatility effect of the conditional volatility in VAR as well as the return-to-return interdependence effect of the structural shocks. Significant changes in interdependence and the volatility effect provide important evidence for contagion caused by increases in cross-market linkages through these two channels. Applying this approach to the subprime mortgage crisis, we examine whether there existed financial contagion between the stock markets of the U.S. and those of the major countries in Asia, America, and Europe. Empirical assessment confirms that most of the countries experienced contagion through either one of the two channels or through both channels, and that through which channel the crisis is transmitted to a country depends on the country’s economic robustness and global financial market integration. The impact of a shock from the U.S. on other markets tends to be more pronounced and persistent when it is propagated through the volatility effect than through interdependence.