News spillovers from the Greek debt crisis: Impact on the Eurozone financial sector
We examine the impact of changes in Greek sovereign yield spreads on abnormal returns of financial sector stocks for a sample of Eurozone countries, during the Greek debt crisis. We find that increases in yield spreads are associated with negative abnormal returns on financial stocks in the Portugal, Spain and Netherlands. These abnormal returns are driven in part by ratings downgrades and other unfavorable news announcements about Greece. We isolate the effects of known transmission channels–impairment of financial firms’ asset base due to cross-holdings of Greek bonds, from increases in domestic interest rates and higher funding costs. Our analysis indicates that news events lead to spillovers in excess of what can be explained by these channels of transmission.
If 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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
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.:
- Taimur Baig & Ilan Goldfajn, 1999.
"Financial Market Contagion in the Asian Crisis,"
IMF Staff Papers,
Palgrave Macmillan, vol. 46(2), pages 3-3.
- Graciela Kaminsky & Sergio L. Schmukler, 2002.
"Emerging Market Instability: Do Sovereign Ratings Affect Country Risk and Stock Returns?,"
World Bank Economic Review,
World Bank Group, vol. 16(2), pages 171-195, August.
- Kaminsky, Graciela & Schmukler, Sergio, 2001. "Emerging markets instability: do sovereign ratings affect country risk and stock returns?," Policy Research Working Paper Series 2678, The World Bank.
- Geert Bekaert & Campbell R. Harvey & Angela Ng, 2005.
"Market Integration and Contagion,"
The Journal of Business,
University of Chicago Press, vol. 78(1), pages 39-70, January.
- Kyle, Steven C. & Wirick, Ronald G., 1990. "The impact of sovereign risk on the market valuation of U.S. bank equities," Journal of Banking & Finance, Elsevier, vol. 14(4), pages 761-780, October.
- Kee-Hong Bae & G. Andrew Karolyi & Rene M. Stulz, 2000.
"A New Approach to Measuring Financial Contagion,"
NBER Working Papers
7913, National Bureau of Economic Research, Inc.
- Veronesi, Pietro, 1999. "Stock Market Overreaction to Bad News in Good Times: A Rational Expectations Equilibrium Model," Review of Financial Studies, Society for Financial Studies, vol. 12(5), pages 975-1007.
- Graciela L. Kaminsky & Carmen Reinhart & Carlos A. Vegh, 2003.
"The Unholy Trinity of Financial Contagion,"
NBER Working Papers
10061, National Bureau of Economic Research, Inc.
- Reinhart, Carmen & Kaminsky, Graciela & Vegh, Carlos, 2003. "The unholy trinity of financial contagion," MPRA Paper 13878, University Library of Munich, Germany.
- Reinhart, Carmen & Kaminsky, Graciela & Vegh, Carlos, 2002. "Two Hundred Years of Contagion," MPRA Paper 13229, University Library of Munich, Germany.
- Mink, Mark & de Haan, Jakob, 2013.
"Contagion during the Greek sovereign debt crisis,"
Journal of International Money and Finance,
Elsevier, vol. 34(C), pages 102-113.
- Graciela L. Kaminsky & Sergio L. Schmukler, 1999.
"What triggers market jitters: a chronicle of the Asian crisis,"
International Finance Discussion Papers
634, Board of Governors of the Federal Reserve System (U.S.).
- Kaminsky, Graciela L. & Schmukler, Sergio L., 1999. "What triggers market jitters?: A chronicle of the Asian crisis," Journal of International Money and Finance, Elsevier, vol. 18(4), pages 537-560, August.
- Kaminsky, Graciela L. & Schmukler, Sergio L., 1999. "What triggers market jitters? A chronicle of the Asian crisis," Policy Research Working Paper Series 2094, The World Bank.
- Amar Gande & David Parsley, 2003.
"News Spillovers in the Sovereign Debt Market,"
062003, Hong Kong Institute for Monetary Research.
- John Elder & Apostolos Serletis, 2010.
"Oil Price Uncertainty,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 42(6), pages 1137-1159, 09.
- Tom Doan, "undated". "RATS programs to estimate structural VAR-GARCH-M model," Statistical Software Components RTZ00052, Boston College Department of Economics.
- Laura E. Kodres & Matthew Pritsker, 2002. "A Rational Expectations Model of Financial Contagion," Journal of Finance, American Finance Association, vol. 57(2), pages 769-799, 04.
- Kristin J. Forbes & Roberto Rigobon, 2002.
"No Contagion, Only Interdependence: Measuring Stock Market Comovements,"
Journal of Finance,
American Finance Association, vol. 57(5), pages 2223-2261, October.
- Kristin Forbes & Roberto Rigobon, 1999. "No Contagion, Only Interdependence: Measuring Stock Market Co-movements," NBER Working Papers 7267, National Bureau of Economic Research, Inc.
- Jiang, George J. & Konstantinidi, Eirini & Skiadopoulos, George, 2012. "Volatility spillovers and the effect of news announcements," Journal of Banking & Finance, Elsevier, vol. 36(8), pages 2260-2273.
- Graciela L. Kaminsky & Carmen M. Reinhart, 2001.
"Bank Lending and Contagion: Evidence from the Asian Crisis,"
in: Regional and Global Capital Flows: Macroeconomic Causes and Consequences, NBER-EASE Volume 10, pages 73-99
National Bureau of Economic Research, Inc.
- Reinhart, Carmen & Kaminsky, Graciela, 2001. "Bank Lending and Contagion: Evidence from the Asian Crisis," MPRA Paper 7580, University Library of Munich, Germany.
- Nelson, Daniel B., 1990. "Stationarity and Persistence in the GARCH(1,1) Model," Econometric Theory, Cambridge University Press, vol. 6(03), pages 318-334, September.
- Sebastian Missio & Sebastian Watzka, 2011. "Financial Contagion and the European Debt Crisis," CESifo Working Paper Series 3554, CESifo Group Munich.
- Beetsma, Roel & Giuliodori, Massimo & de Jong, Frank & Widijanto, Daniel, 2013. "Spread the news: The impact of news on the European sovereign bond markets during the crisis," Journal of International Money and Finance, Elsevier, vol. 34(C), pages 83-101.
- Karolyi, G Andrew, 1995. "A Multivariate GARCH Model of International Transmissions of Stock Returns and Volatility: The Case of the United States and Canada," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 11-25, January.
- Alexopoulou, Ioana & Andersson, Magnus & Georgescu, Oana Maria, 2009. "An empirical study on the decoupling movements between corporate bond and CDS spreads," Working Paper Series 1085, European Central Bank.
When requesting a correction, please mention this item's handle: RePEc:eee:jbfina:v:38:y:2014:i:c:p:51-63. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.