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on Financial Markets |
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Issue of 2012‒07‒08
three papers chosen by |
| By: | Nuno Cassola (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Claudio Morana (Università di Milano-Bicocca, Dipartimento di Economia Politica, Piazza dell’Ateneo Nuovo, 1 - 20126, Milano, Italy; at International Centre for Economic Research (ICER), Torino, Italy; Centre for Research on Pensions and Welfare Policies (CeRP), Moncalieri, Italy and Fondazione ENI Enrico Mattei (FEEM), Milano, Italy;) |
| Abstract: | In the paper we investigate the empirical features of euro area money market turbulence during the recent nancial crisis. By means of a novel Fractionally Integrated Heteroskedastic Factor Vector Au- toregressive model, we nd evidence of a deterministic level factor in the EURIBOR-OIS (OIS) spreads term structure, associated with the two waves of stress in the interbank market, following the BNP Paribas (9 August 2007) and the Lehman Brothers (16 September 2008) shocks, and two additional factors, of the long memory type, bearing the interpretation of curvature and slope factors. The unfold- ing of the crisis yielded a signi cant increase in the persistence and volatility of OIS spreads. We also nd evidence of a declining trend in the level and volatility of OIS spreads since December 2008, associated with ECB interest rate cuts and full allotment policy. JEL Classification: C32, E43, E58, G15. |
| Keywords: | money market interest rates, credit/liquidity risk, frac- tionally integrated heteroskedastic factor vector autoregressive model. |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20121437&r=fmk |
| By: | Jacob Ejsing (Danmarks Nationalbank, Government Debt Management, Havnegade 5, DK-1093 Copenhagen, Denmark.); Magdalena Grothe (European Central Bank, Directorate General Economics, Capital Markets and Financial Structure Division, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Oliver Grothe (University of Cologne, Department of Economic and Social Statistics, Albertus-Magnus-Platz, D-50923 Cologne, Germany.) |
| Abstract: | This paper quantifies liquidity and credit premia in German and French government bond yields. For this purpose, we estimate term structures of governmentguaranteed agency bonds and exploit the fact that any difference in their yields vis-`a-vis government bonds can be attributed to differences in liquidity premia. Adding the information on risk-free rates, we obtain model-free and model-based gauges of sovereign credit premia, which are an important alternative to the information based on CDS markets. The results allow us to quantify the price impact of so-called “safe haven flows”, which strongly affected bond markets in late 2008/early 2009 and again during some phases of the sovereign debt crisis. Thus, we show to what extent these effects disguised the increase of sovereign credit premia in the government yields of core euro area countries. JEL Classification: E44; G12; G01. |
| Keywords: | liquidity premium; sovereign credit risk; yield curve modeling; bond markets; state space models. |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20121440&r=fmk |
| By: | Martin Bohl; Philipp Kaufmann; Patrick Stephan |
| Abstract: | Stocks of German renewable energy companies have commonly been regarded as lucrative investment opportunities. Their innovative line of business initially seemed to promise considerable future earnings. As shown by two powerful bubble tests, the positive sentiment for renewable energy stocks even led to explosive price behavior in the mid-2000s. However, intense sector competition and the economic downturn following the global financial crisis erased profit margins to a large extent. As a result, the former fad stocks have recently turned into losers, loading negatively on price momentum and delivering significantly negative Carhart (1997) four-factor alphas. The radical shift in Germany's energy policy following the Fukushima nuclear disaster in Japan could thus only temporarily halt the continuing decline in alternative energy stock prices. |
| Keywords: | Renewable Energy Stocks, Performance Measurement, Speculative Bubbles, Sup ADF Test, Markov Regime-Switching ADF Test |
| JEL: | G10 G11 G12 Q42 |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:cqe:wpaper:2412&r=fmk |