Putting the “C” into crisis: Contagion, correlations and copulas on EMU bond markets

Philippas, Dionisis; Siriopoulos, Costas

doi:10.1016/j.intfin.2013.09.008

Cited by 82 publications

(34 citation statements)

References 38 publications

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“…3 correlation coefficients (e.g., Brière et al, 2012, Forbes and Rigobon, 2001, Kim et al, 2015, King and Wadhwani, 1990, Sohel Azad et al, 2015, Støve et al, 2014, Wang et al, 2017, single regression and VAR-based approaches (e.g., Baur and Schulze, 2005, Blatt et al, 2015, Climent and Meneu, 2003, Rigobon, 2003, Samarakoon, 2017, multivariate GARCH models (e.g., Bonga-Bonga, 2018, Dungey et al, 2015, Hamao et al, 1990, Mollah et al, 2016, copulas (e.g., Jayech, 2016, Philippas and Siriopoulos, 2013, Rodriguez, 2007, quantile regressions (e.g., Baur and Schulze, 2005, Caporin et al, 2018, Ye et al, 2017, and other approaches 2 The overwhelming majority of studies in this area report empirical evidence broadly in support of the hypothesis that contagious spillovers between markets exist, for a variety of crisis episodes, countries, data frequencies, etc. (with Forbes and Rigobon, 2002, who argue against the prevalent existence of contagion, being one of the few and maybe the most prominent exception).…”

Section: Accepted Manuscriptmentioning

confidence: 99%

Day-of-the-week effects in financial contagion

Sewraj

Gębka

2019

Finance Research Letters

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Section: Accepted Manuscriptmentioning

confidence: 99%

Day-of-the-week effects in financial contagion

Sewraj

Gębka

2019

Finance Research Letters

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“…4 See for example Bernoth and Erdogan (2012),Caporin et al (2013), De Santis(2012),Giordano et al (2013),Kalbaska and Gątkowski (2012),Ludwig (2014),Manasse and Zavalloni (2013),Metiu (2012),Missio and Watzka (2011), Philippas andSiriopoulos (2013) andFong and Wong (2012). Some of these papers examine the transmission of volatility.…”

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confidence: 99%

Behavioral Finance and Efficient Markets: What does the Euro Crisis Tell us?

Bird

Willett

2017

Open Econ Rev

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The crisis in the Eurozone between 2009 and 2015 provides an opportunity to test whether financial markets fully display the characteristics associated with the efficient market hypothesis or whether behavioral approaches which focus on excessive pessimism and confirmation bias also offer insights into the performance of markets. In this paper we test several important aspects of market behavior. Specifically we examine the extent to which large changes in risk premia amongst the countries that encountered crises were related to news. We also investigate whether the impact of good and bad news was symmetrical. Finally we explore whether changes in risk premia in Greece affected risk premia in other countries in an asymmetrical and biased way. We discover that while there is considerable evidence that financial markets often performed in an efficient way during the crisis, there are also important departures from this pattern that are consistent with the behavioral approach. Our findings imply that both the efficient and behavioral approaches are helpful when trying to understand how markets perform.

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“…and Gajurel (2014) state that the two types of contagion are not necessary mutually exclusive; Ludwig (2014) points out that "pure" contagion effects are likely to be overstated when changes in common risk factors are not controlled for; Philippas and Siriopoulos (2013) point out that international portfolios pay attention to cross-market correlation dynamics within the Eurozone, based not only on their excess macroeconomic and fiscal performances but also driven by behavioural reasons; Arghyrou and Kontonikas 2012find a marked shift in market pricing behaviour from a pre-crisis 'convergence-trade' model before August 2007 to one driven by both macro-fundamentals and international risk thereafter; whilst Beirne and Fratzscher (2013), who identify "fundamental-based contagion" with a reassessment of fundamentals in times of crisis, document that the prime explanation for the sharp sovereign risk increase during the EU debt crisis was due to fundamental rather than to pure contagion (unlike them, in this paper we follow Goldstein (1998) or Masson (1999) and consider sudden shifts in market confidence and/or expectations that may lead to a reconsideration of unchanged fundamentals as important factors causing "pure contagion" 35 ).…”

Section: Empirical Evidencementioning

confidence: 99%

Causes and hazards of the euro area sovereign debt crisis: Pure and fundamentals-based contagion

Gómez‐Puig

Sosvilla‐Rivero

2016

Economic Modelling

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This paper tries to contribute to the understanding of sovereign debt crises' pattern by empirically investigating the determinants of the recent euro area crisis to assess if its transmission was due to "pure" or "fundamentals-based" contagion. Using sovereign bond yield spreads with respect to Germany for a sample of ten central and peripheral countries from January 1999 to December 2012, we firstly examine the dynamic evolution of Granger-causality within the 90 pairs of yield spreads in our sample to detect episodes of contagion (associated with episodes of significant intensification in causality). Secondly, we make use of a logit model to explore whether there is evidence of "pure contagion" or "fundamentals-based contagion", by trying to determine which factors might have been behind the detected contagion episodes. Our results suggest that contagion episodes are concentrated just after the inception of the EMU and matching the global financial crisis, yielding more accurate and sensible indicators than those obtained from DCC-GARCH models used in prior studies. Indeed, they preceded the outburst of the global financial crisis (causality intensification is detected from March 2008), and reached a peak during January-May 2011. Furthermore, they underline the coexistence of "pure" and "fundamentals-based contagion" during the recent European debt crisis.

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Putting the “C” into crisis: Contagion, correlations and copulas on EMU bond markets

Cited by 82 publications

References 38 publications

Day-of-the-week effects in financial contagion

Day-of-the-week effects in financial contagion

Behavioral Finance and Efficient Markets: What does the Euro Crisis Tell us?

Causes and hazards of the euro area sovereign debt crisis: Pure and fundamentals-based contagion

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