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Fragmentation and heterogeneity in the euro-area corporate bond market: Back to normal?

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  • Zaghini, Andrea

Abstract

We assess the degree of market fragmentation in the euro-area corporate bond market by disentangling the determinants of the risk premium paid on bonds at origination. By looking at over 2,400 bonds we are able to isolate the country-specific effects which are a suitable indicator of the market fragmentation. We find that, after peaking during the sovereign debt crisis, fragmentation shrank in 2013 and receded to pre-crisis levels only in 2014. However, the low level of estimated market fragmentation is coupled with a still high heterogeneity in actual bond yields, challenging the consistency of the new equilibrium.

Suggested Citation

  • Zaghini, Andrea, 2016. "Fragmentation and heterogeneity in the euro-area corporate bond market: Back to normal?," CFS Working Paper Series 530, Center for Financial Studies (CFS).
  • Handle: RePEc:zbw:cfswop:530
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    Cited by:

    1. Gibson, Heather D. & Hall, Stephen G. & Tavlas, George S., 2016. "How the euro-area sovereign-debt crisis led to a collapse in bank equity prices," Journal of Financial Stability, Elsevier, vol. 26(C), pages 266-275.
    2. repec:eee:jimfin:v:82:y:2018:i:c:p:1-25 is not listed on IDEAS
    3. repec:eee:finana:v:55:y:2018:i:c:p:35-49 is not listed on IDEAS
    4. De Santis, Roberto A., 2016. "Credit spreads, economic activity and fragmentation," Working Paper Series 1930, European Central Bank.
    5. repec:taf:jpolrf:v:21:y:2018:i:4:p:319-334 is not listed on IDEAS
    6. repec:wly:ijfiec:v:24:y:2019:i:1:p:97-112 is not listed on IDEAS
    7. Fabrizio Malatesta & Sergio Masciantonio & Andrea Zaghini, 2016. "The Shadow Banking System in the Euro Area: Definitions, Key Features and the Funding of Firms," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 2(2), pages 217-237, July.
    8. Zaghini, Andrea, 2019. "The CSPP at work: Yield heterogeneity and the portfolio rebalancing channel," Journal of Corporate Finance, Elsevier, vol. 56(C), pages 282-297.
    9. Dimitrios Anastasiou & Helen Louri & Mike Tsionas, 2019. "Nonperforming loans in the euro area: Are core–periphery banking markets fragmented?," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 24(1), pages 97-112, January.
    10. Guillaume Horny & Simone Manganelli & Benoit Mojon, 2018. "Measuring Financial Fragmentation in the Euro Area Corporate Bond Market," Journal of Risk and Financial Management, MDPI, Open Access Journal, vol. 11(4), pages 1-19, October.
    11. repec:eee:finsta:v:36:y:2018:i:c:p:12-21 is not listed on IDEAS
    12. Zaghini, Andrea, 2017. "A tale of fragmentation: Corporate funding in the euro-area bond market," International Review of Financial Analysis, Elsevier, vol. 49(C), pages 59-68.
    13. repec:eee:eneeco:v:75:y:2018:i:c:p:249-260 is not listed on IDEAS
    14. Matteo Accornero & Paolo Finaldi Russo & Giovanni Guazzarotti & Valentina Nigro, 2018. "Missing Investors in the Italian Corporate Bond Market," Questioni di Economia e Finanza (Occasional Papers) 450, Bank of Italy, Economic Research and International Relations Area.

    More about this item

    Keywords

    corporate bond market; Sovereign debt crisis; financial fragmentation;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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