Contagion during the Greek Sovereign Debt Crisis
AbstractUsing an event study approach, we examine the impact of news about Greece and news about a Greek bailout on bank stock prices in 2010 using data for 48 banks included in the European stress tests. We identify the twenty days with extreme returns on Greek sovereign bonds and categorize the news events during those days into news about Greece and news about the prospects of a Greek bailout. We find that news about Greece does not lead to abnormal returns while news about a bailout does, even for banks without any exposure to Greece or other highly indebted euro countries. This finding suggests that markets consider news about the bailout to be a signal of European governments' willingness in general to use public funds to combat the financial crisis. Sovereign bond prices of Portugal, Ireland, and Spain respond to both news about Greece and news about a Greek bailout.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 335.
Date of creation: Feb 2012
Date of revision:
contagion; euro crisis; event study;
Other versions of this item:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
This paper has been announced in the following NEP Reports:
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bekaert, Geert & Ehrmann, Michael & Fratzscher, Marcel & Mehl, Arnaud, 2011.
"Global crises and equity market contagion,"
CEPR Discussion Papers
8438, C.E.P.R. Discussion Papers.
- Bekaert, Geert & Ehrmann, Michael & Fratzscher, Marcel & Mehl, Arnaud, 2011. "Global crises and equity market contagion," Working Paper Series 1381, European Central Bank.
- Geert Bekaert & Michael Ehrmann & Marcel Fratzscher & Arnaud J. Mehl, 2011. "Global Crises and Equity Market Contagion," NBER Working Papers 17121, National Bureau of Economic Research, Inc.
- Afonso, António & Furceri, Davide & Gomes, Pedro, 2012.
"Sovereign credit ratings and financial markets linkages: Application to European data,"
Journal of International Money and Finance,
Elsevier, vol. 31(3), pages 606-638.
- António Afonso & Davide Furceri & Pedro Gomes, 2011. "Sovereign credit ratings and financial markets linkages: application to European data," Working Papers 2011/14, Department of Economics at the School of Economics and Management (ISEG), Technical University of Lisbon..
- Afonso, António & Furceri, Davide & Gomes, Pedro, 2011. "Sovereign credit ratings and financial markets linkages: application to European data," Working Paper Series 1347, European Central Bank.
- Ray Fair, 2003.
"Events that Shook the Market,"
Yale School of Management Working Papers
ysm307, Yale School of Management.
- Bertrand Candelon & Amadou N. R. Sy & Rabah Arezki, 2011.
"Sovereign Rating News and Financial Markets Spillovers: Evidence from the European Debt Crisis,"
IMF Working Papers
11/68, International Monetary Fund.
- Rabah Arezki & Bertrand Candelon & Amadou Sy, 2011. "Sovereign Rating News and Financial Markets Spillovers: Evidence from the European Debt Crisis," CESifo Working Paper Series 3411, CESifo Group Munich.
- Panayiotis Papakyriacou & George Nishiotis & Andreas Milidonis & Alex Michaelides, 2012.
"Sovereign Debt Rating Changes and the Stock Market,"
2012 Meeting Papers
522, Society for Economic Dynamics.
- Michaelides, Alexander & Milidonis, Andreas & Nishiotis, George & Papakyriacou, Panayiotis, 2012. "Sovereign Debt Rating Changes and the Stock Market," CEPR Discussion Papers 8743, C.E.P.R. Discussion Papers.
- A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
- Sebastian Missio & Sebastian Watzka, 2011. "Financial Contagion and the European Debt Crisis," CESifo Working Paper Series 3554, CESifo Group Munich.
- Marcello Pericoli & Massimo Sbracia, 2001.
"A Primer on Financial Contagion,"
Temi di discussione (Economic working papers)
407, Bank of Italy, Economic Research and International Relations Area.
- Michael Davies & Tim Ng, 2011. "The rise of sovereign credit risk: implications for financial stability," BIS Quarterly Review, Bank for International Settlements, September.
- Morris Goldstein & Carmen M. Reinhart, 2000. "Assessing Financial Vulnerability: An Early Warning System for Emerging Markets," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 100.
- Michael Ehrmann & Chiara Osbat & Jan Strasky & Lenno Uusküla, 2013.
"The Euro exchange rate during the European sovereign debt crisis – dancing to its own tune?,"
Bank of Estonia Working Papers
wp2013-3, Bank of Estonia, revised 24 May 2013.
- Ehrmann, Michael & Osbat, Chiara & Stráský, Jan & Uusküla, Lenno, 2013. "The euro exchange rate during the European sovereign debt crisis - dancing to its own tune?," Working Paper Series 1532, European Central Bank.
- Chouliaras, Andreas & Grammatikos, Theoharry, 2013. "News Flow, Web Attention and Extreme Returns in the European Financial Crisis," MPRA Paper 51335, University Library of Munich, Germany.
- Peter Claeys & Borek Vašícek, 2012.
"“Measuring Sovereign Bond Spillover in Europe and the Impact of Rating News”,"
AQR Working Papers
201209, University of Barcelona, Regional Quantitative Analysis Group, revised Nov 2012.
- Peter Claeys & Borek Vasicek, 2012. "Measuring Sovereign Bond Spillover in Europe and the Impact of Rating News," Working Papers 2012/07, Czech National Bank, Research Department.
- Peter Claeys & Borek Vašícek, 2012. "“Measuring Sovereign Bond Spillover in Europe and the Impact of Rating News”," IREA Working Papers 201219, University of Barcelona, Research Institute of Applied Economics, revised Nov 2012.
- Paulo Horta, 2013. "Contagion Effects in the European Nyse Euronext Stock Markets in the Context of the 2010 Sovereign Debt Crisis," CEFAGE-UE Working Papers 2013_12, University of Evora, CEFAGE-UE (Portugal).
- Daniel Kapp, 2012. "The optimal size of the European Stability Mechanism: A cost-benefit analysis," DNB Working Papers 349, Netherlands Central Bank, Research Department.
- Heather D. Gibson & Stephen G. Hall & George S. Tavlas, 2013. "Fundamentally Wrong: Market Pricing Of Sovereigns And The Greek Financial Crisis," Discussion Papers in Economics 13/20, Department of Economics, University of Leicester.
- Gade, Thomas & Salines, Marion & Glöckler, Gabriel & Strodthoff, Steffen, 2013. "“Loose lips sinking markets?": the impact of political communication on sovereign bond spreads," Occasional Paper Series 150, European Central Bank.
- Vítor Caldeirinha & J. Augusto Felício & Andreia Dionísio, 2013. "Effect of the container terminal characteristics on performance," CEFAGE-UE Working Papers 2013_13, University of Evora, CEFAGE-UE (Portugal).
- Heinemann, Friedrich & Osterloh, Steffen & Kalb, Alexander, 2013. "Sovereign risk premia: The link between fiscal rules and stability culture," ZEW Discussion Papers 13-016, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Tola, Albi & Wälti, Sébastien, 2012. "Deciphering financial contagion in the euro area during the crisis," MPRA Paper 49251, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rob Vet).
If references are entirely missing, you can add them using this form.