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EMU sovereign spreads and macroeconomic news

Author

Listed:
  • Arru, Daniela
  • Iacovoni, Davide
  • Monteforte, Libero
  • Pericoli, Filippo Maria

Abstract

We investigate the relationship between macroeconomic news and sovereign spreads in the euro area at weekly frequency. Our focus lies in the role played by macroeconomic announcements. To this aim we augment a standard GARCH model with a synthetic measure for macroeconomic surprises obtained by aggregating deviations between data releases and market expectations on a set of indicators chosen for being closely watched by economic analysts and financial operators. We find that the dissemination of macroeconomic data on the US economy affects the level of sovereign spreads, i.e. the better the news the lower the spreads. Moreover, the dissemination of bad news on the euro area economy affects negatively the volatility, i.e. the worse the news the higher the volatility.

Suggested Citation

  • Arru, Daniela & Iacovoni, Davide & Monteforte, Libero & Pericoli, Filippo Maria, 2012. "EMU sovereign spreads and macroeconomic news," MPRA Paper 37200, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:37200
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    References listed on IDEAS

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    Cited by:

    1. Paolo Canofari & Giancarlo Marini & Giovanni Piersanti, 2015. "Expectations and systemic risk in EMU government bond spreads," Quantitative Finance, Taylor & Francis Journals, vol. 15(4), pages 711-724, April.
    2. Wildmer Daniel Gregori & Wildmer Agnese Sacchi, 2016. "Has the Grexit news spilled over into euro area financial markets? The role of domestic political leaders, supranational executives and institutions," Mo.Fi.R. Working Papers 134, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.

    More about this item

    Keywords

    sovereign bond spreads; economic news;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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