Macro news and bond yield spreads in the euro area

Caporale, Guglielmo Maria; Spagnolo, Fabio; Spagnolo, Nicola

doi:10.1080/1351847x.2017.1285797

Cited by 36 publications

(30 citation statements)

References 31 publications

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“…Qadan and Yagil [54] observe that changes in investor sentiment drive the gold returns, but not vice versa. Caporale et al [55] further point out that, during non-crisis periods, there is no significant causality between bond price and investor sentiment.…”

Section: Literature Reviewmentioning

confidence: 99%

Can Stock Investor Sentiment Be Contagious in China?

Cai

Ran

2020

Sustainability

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This paper explores the impact of investor sentiment on financial markets in China by taking the quantile causality test. We find that government bond markets, gold markets, and foreign exchange markets are affected by stock investor sentiment, except for in the corporate bond market. In extreme situations, such as excessively optimistic or pessimistic sentiment, these markets will become more vulnerable to suffering from drastic fluctuations. On the contrary, the market return in government bonds, corporate bonds, and foreign exchange also has an influence on stock investor sentiment. Moreover, these links show various asymmetry due to the heterogeneity of different financial markets. Our results are consistent with the noise trader model, which shows the impact of investor sentiment on market returns. Hence, the authorities can sustain the stabilization of financial markets by reducing information asymmetry, guiding the rational sentiment of investors, and increasing effective regulations.Especially in certain extreme pessimistic situations, sentiment in the stock market can lead to drastic fluctuations in other financial markets [15,16], and the authorities cannot maintain market stability and continuity of development. In turn, the performance of these markets is also a remarkable barometer that leads stock investor sentiment to change [17]. Through information in different market environments, external shocks, not only make asset price fluctuate, but also result in stock investors overreacting, and this affects their investment expectations [18]. This bidirectional transmission is regarded as an important factor for the linkage among major financial markets [19]. Hence, investor sentiment plays an important role in the formation of financial market effectiveness. If investor sentiment cannot be reasonably guided, it will be difficult to suppress irrational trading and speculative bubbles and improve market efficiency.Compared with stock markets in developed countries, individual investors account for a large proportion of Chinese stock investors, which makes the whole market more emotional [20]. With a lack of social responsibility and an awareness of sustaining market efficiency, the individual Chinese investor has an underdeveloped investment education and, thus, they often show irrational investment behavior [21]. Hence, market fluctuation frequently happens, and it is difficult for investor sentiment to be properly guided. Not only do investors make irrational trades in the stock market, but they are also more likely to carry their emotions to other markets [22]. If investor sentiment in the stock market spreads to other markets and causes unexpected fluctuations in China, the pricing and operating efficiency of many financial markets will be damaged. As well as the stock market, the gold, bond, and foreign exchange markets are all financial markets with a large scale in China. If such emotional contagion exists in China, investors who excessively ignore the fundamentals will find it difficult to form th...

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Section: Literature Reviewmentioning

confidence: 99%

Can Stock Investor Sentiment Be Contagious in China?

Cai

Ran

2020

Sustainability

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“…In this way, we specifically test to see whether contagion diminished, with markets treating other Eurozone countries as being better insulated from events in Greece. Following on from parts of the literature that suggest that there are asymmetries in the response of markets to good and bad news (Afonso, Furceri, & Gomes, 2012;Beetsma, Giuliodori, Jong, & Widijanto, 2013;Caporale, Spagnolo, & Spagnolo, 2014), we investigate the extent to which the strength of contagion depended on whether the level of the risk premium in Greece was rising or falling.…”

Section: Crises In Greece and Contagion: The Literaturementioning

confidence: 99%

Was it different the second time? An empirical analysis of contagion during the crises in Greece 2009–15

Bird

Pentecost

et al. 2017

World Economy

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Over the period between end‐2009 and end‐2015, Greece experienced two discernible financial crises. This paper undertakes a correlation analysis of risk premia to investigate the nature and extent of contagion from these crises to other selected Eurozone countries. A commonly expressed view is that the effects of the second crisis were more muted since the systemic risks were seen by markets as being lower. However, using a rolling correlation model, a Dynamic Conditional Correlation GARCH (DCC‐GARCH) model and a t‐copula model we find that this is not the case. Broadly speaking, the contagion effects of the second crisis were at least as large as those associated with the first one.

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“…Bekaert et al (2014) suggest September 2009 as the beginning of the debt crisis. Instead, Caporale et al (2014) select September 2008, the day of the collapse of Lehman Brothers, as the beginning of the global crisis. A sequential dummy analysis running from mid-2007 to mid-2010 (not reported in the paper) was performed; it confirms that the parameter shifts took place in 2009.…”

Section: Methodsmentioning

confidence: 99%

Trust in Institutions and Income Inequality in the Eurozone: The Role of the Crisis

Bonasia¹,

Canale²,

Liotti³

et al. 2016

Self Cite

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income distribution, together with standard economic indicators such as unemployment and inflation, in the consolidation of supranational institutions. The empirical analysis also controls for financial market shocks, including domestic bond yields and stock market returns. The additional contribution is to analyze whether the sensitiveness of trust has been strengthened during the recent crisis, associating binary dummies to explanatory variables. The main conclusions can be summarized as follows: a) income inequality negatively affects trust in the EC and the EP in normal times; in crisis times, this relation is strengthened and extended to the ECB for one of the two indexes of trust considered; b) inflation and unemployment significantly affect trust in all European

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Macro news and bond yield spreads in the euro area

Cited by 36 publications

References 31 publications

Can Stock Investor Sentiment Be Contagious in China?

Can Stock Investor Sentiment Be Contagious in China?

Was it different the second time? An empirical analysis of contagion during the crises in Greece 2009–15

Trust in Institutions and Income Inequality in the Eurozone: The Role of the Crisis

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