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on Financial Markets |
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Issue of 2012‒07‒23
five papers chosen by |
| By: | Charlotte Christiansen (Aarhus University and CREATES) |
| Abstract: | I investigate the time variation in the integration of EU government bond markets. The integration is measured by the explanatory power of European factor portfolios for the individual bond markets for each year. The integration of the government bond markets is stronger for EMU than non-EMU members and stronger for old than new EU members. The integration is weaker for the sovereign debt crisis countries than for other countries. The integration of the EU bond markets is decreasing over time and this appears not to be caused by the recent ?nancial and sovereign debt crisis. |
| Keywords: | Business Integration, European bond markets, Financial crises; Factor models |
| JEL: | C23 C58 F36 G01 G12 G15 |
| Date: | 2012–07–10 |
| URL: | http://d.repec.org/n?u=RePEc:aah:create:2012-33&r=fmk |
| By: | Gregory Connor (Department of Economics Finance and Accounting, National University of Ireland, Maynooth); Anita Suurlaht (Department of Economics Finance and Accounting, National University of Ireland, Maynooth) |
| Abstract: | This paper examines the short-term dynamics, macroeconomic sensitivities, and longer-term trends in the variances and covariances of national equity market index daily returns for eleven countries in the Euro currency zone. We modify Colacito, Engle and Ghysel?s Mixed Data Sampling Dynamic Conditional Correlation Garch model to include a new scalar measure for the degree of correlatedness in time-varying correlation matrices. We also explore the robustness of the fi?ndings with a less model-dependent realized covariance estimator. We fi?nd a secular trend toward higher correlation during our sample period, and signi?cant linkages between macroeconomic and market-wide variables and dynamic correlation. One notable fi?nding is that average correlation between these markets is lower when their average GDP growth rate is lower or when more of them have negative GDP growth. |
| Keywords: | : dynamic conditional correlation, multivariate GARCH,international stock market integration, European Monetary Union. |
| JEL: | C51 C58 G15 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:may:mayecw:n222-12.pdf&r=fmk |
| By: | Giampiero M. Gallo (Dipartimento di Statistica "G.Parenti", Università di Firenze); Edoardo Otranto (Dipartimento di Scienze Cognitive e della Formazione, Università degli Studi di Messina) |
| Abstract: | Empirical evidence shows that the dynamics of high frequency–based measures of volatility exhibit persistence and occasional abrupt changes in the average level. By looking at volatility measures for major indices, we notice similar patterns (including jumps at about the same time), with stronger similarities, the higher the degree of company capitalization represented in the indices. We adopt the recent Markov Switching Asymmetric Multiplicative Error Model to model the dynamics of the conditional expectation of realized volatility. This allows us to address the issues of a slow moving average level of volatility and of different dynamics across regimes. An extension sees a more flexible model combining the characteristics of Markov Switching and smooth transition dynamics. |
| Keywords: | Multiplicative Error Models, regime switching, realized volatility, volatility persistence, smooth transition |
| JEL: | C22 C51 C52 C58 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:fir:econom:wp2012_03&r=fmk |
| By: | Claudio Dicembrino (Enel SpA and Faculty of Economics, University of Rome "Tor Vergata"); Pasquale Lucio Scandizzo (Faculty of Economics, University of Rome "Tor Vergata") |
| Abstract: | This paper tests the hypothesis that portfolio diversification can increase the threat of systemic financial risk. The paper provides first a theoretical rationale for the possibility that systemic risk may be increased by the proliferation of financial instruments that lead operators to hold increasingly similar portfolios. Secondly, the paper tests the hypothesis that diversification may result in increasing systematic risk, by analyzing the portfolio dynamics of some of the major world open funds. |
| Keywords: | portfolio diversification, financial stability, systemic risk, CAPM |
| JEL: | G01 G11 G32 |
| Date: | 2012–07–11 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:240&r=fmk |
| By: | Beetsma, Roel; de Jong, Frank; Giuliodori, Massimo; Widijanto, Daniel |
| Abstract: | We investigate how "news" affected domestic interest spreads vis-à-vis Germany and how it propagated to other countries during the recent crisis period, thereby distinguishing between the so-called GIIPS countries and other European countries. We make original use of the Eurointelligence newsflash to construct news variables based on the amount of news that is released on a country on a given date. We find that more news on average raises the domestic interest spread of GIIPS countries since September 2009. In addition, we find that it leads to an increase in the interest spreads of other GIIPS countries. The magnitude of the news effects is related to cross-border bank holdings. A split of news into bad and good news shows that the upward pressure on domestic and foreign interest spreads is driven by bad news. We also find spill-overs of bad news from GIIPS countries onto non-GIIPS countries. However, the magnitude of these spill-overs is substantially smaller than that to other GIIPS countries. |
| Keywords: | co-movement; Euro-intelligence; GIIPS; interest rate spreads; new variables; non-GIIPS; spill-overs |
| JEL: | E62 G01 G12 G15 H61 H62 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9043&r=fmk |