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Contagion effects during financial crisis: Evidence from the Greek sovereign bonds market

Author

Listed:
  • Pragidis, I.C.
  • Aielli, G.P.
  • Chionis, D.
  • Schizas, P.

Abstract

In this study, we test for the possible contagion effects of the 10-year Greek government bond yield. We first employ the well-documented adjusted correlation coefficient of Forbes and Rigobon (2002) and then we estimate an exponential generalized autoregressive conditional heteroskedasticity model extended for volatility spillovers. Finally, we propose an extension of the corrected Dynamic Conditional Correlation (cDCC) model, which allows for structural breaks in the correlation dynamics. The suggested cDCC specification provides a natural testing framework for the correlation contagion hypothesis. Compared with other similar approaches, the proposed structural break cDCC approach allows for consistent inferences. The results do not confirm any contagious effects stemming from the 10-year Greek sovereign bond.

Suggested Citation

  • Pragidis, I.C. & Aielli, G.P. & Chionis, D. & Schizas, P., 2015. "Contagion effects during financial crisis: Evidence from the Greek sovereign bonds market," Journal of Financial Stability, Elsevier, vol. 18(C), pages 127-138.
  • Handle: RePEc:eee:finsta:v:18:y:2015:i:c:p:127-138
    DOI: 10.1016/j.jfs.2015.04.001
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    References listed on IDEAS

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    1. Díez-Esteban, José María & Farinha, Jorge Bento & García-Gómez, Conrado Diego, 2016. "The role of institutional investors in propagating the 2007 financial crisis in Southern Europe," Research in International Business and Finance, Elsevier, vol. 38(C), pages 439-454.
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    5. António Afonso & Mina Kazemi, 2018. "Sovereign Bond Yields Spreads Spillovers in the EMU," Working Papers REM 2018/52, ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa.
    6. Kliber, Agata & Płuciennik, Piotr, 2017. "Euro or not? Vulnerability of Czech and Slovak economies to regional and international turmoil," Economic Modelling, Elsevier, vol. 60(C), pages 313-323.
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    10. Hammoudeh, Shawkat & Kang, Sang Hoon & Mensi, Walid & Nguyen, Duc Khuong, 2014. "Dynamic global linkages of the BRICS stock markets with the U.S. and Europe under external crisis shocks: Implications for portfolio risk forecasting," MPRA Paper 73400, University Library of Munich, Germany, revised Mar 2016.
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