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Financial crises, the decoupling–recoupling hypothesis, and the risk premium on the Greek stock index futures market

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  • Floros, Christos
  • Kizys, Renatas
  • Pierdzioch, Christian

Abstract

Our results shed light on the contribution of local and regional factors to the risk premium on the Greek stock index futures market. Building upon the stochastic discount factor model, we estimate a multivariate exponential GARCH-in-mean model to uncover the risk premium on the FTSE/ASE-20 stock index futures traded in the ADEX, Greece. We provide evidence that the risk premium was mainly driven by its regional (European) component before the recent financial crisis. We also report that the local (Greek) component has become more important for the risk premium on the Greek stock index futures market after the recent debt crisis in Greece. Importantly, our results suggest that the decoupling–recoupling hypothesis, according to which the recent financial crisis has strengthened international financial links, does not apply to the risk premium on the stock index futures market. Rather, we report evidence consistent with a recoupling–decoupling hypothesis.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Financial Analysis.

Volume (Year): 28 (2013)
Issue (Month): C ()
Pages: 166-173

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Handle: RePEc:eee:finana:v:28:y:2013:i:c:p:166-173

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Web page: http://www.elsevier.com/locate/inca/620166

Related research

Keywords: Decoupling–recoupling hypothesis; Greece; Multivariate exponential GARCH-in-mean model; Risk premium; Stochastic discount factor model; Stock index futures market; FTSE/ASE-20;

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