Volatility spillovers and dynamic correlation in European bond markets

Skintzi, Vasiliki D.; Refenes, Apostolos-Paul N.

doi:10.1016/j.intfin.2004.12.003

Cited by 89 publications

(20 citation statements)

References 30 publications

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“…Christiansen (2007) brakes down volatility to local, regional and global components, and finds evidence of substantial differences between the nature of the volatility of bonds of EMU member countries and non EMU member countries. Skintzi and Refenes (2006) find that price and volatility spillover coefficients increase from January 1999 to 2001. Similar are the findings of Cappiello et al (2006) from the perspective of examining the response of bond yields of EMU countries in bad news before and after Euro period.…”

Section: Literature Reviewmentioning

confidence: 94%

Sovereign bond yield spillovers in the Euro zone during the financial and debt crisis

Antonakakis

Vergos

2013

Journal of International Financial Markets, Institutions and Mo

144

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In this paper we examine the linkages of government bond yield spreads (BYS) between Euro zone countries over the period March 3, 2007 -June 18, 2012, thus considering the intriguing features of BYS spillovers during the global financial and the Euro zone debt crisis. Splitting our sample to Euro zone periphery and core countries, and using the VARbased spillover index approach of Diebold and Yilmaz (2012), we find that: (i) on average, BYS shocks tend to increase future BYS, and are related to news announcements and policy changes; (ii) BYS spillovers between Euro zone countries are highly intertwined, originating mostly from the periphery (Greece, Ireland, Italy, Portugal and Spain (GIIPS)) and to a lesser extent from the core (Austria, Belgium, France and Netherlands (ABFN)). The within-effect of BYS spillovers is of greater magnitude within the periphery than that within the core; iv) The between-effect (core vs periphery) of BYS spillovers suggests directional spillovers of greater magnitude from the periphery to the Euro zone core than vice-versa.Generalized impulse response analyses provide additional support to these findings. Our findings highlight the increased vulnerability of Euro zone from the destabilizing shocks originating from the beleaguered Euro zone countries in the periphery.

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Section: Literature Reviewmentioning

confidence: 94%

Sovereign bond yield spillovers in the Euro zone during the financial and debt crisis

Antonakakis

Vergos

2013

Journal of International Financial Markets, Institutions and Mo

144

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“…Inter-market studies for sovereign bonds (for Europe, e.g., Kim et al, 2006;Abad et al, 2010;Abad et al, 2014; for Europe and the US, e.g., Skintzi and Refenes, 2006;Christiansen, 2007; for developed countries, Driessen et al, 2003; for emerging and frontier countries, Nowak et al, 2011;and Piljak, 2013) and equities (Connolly et al, 2007;Christiansen and Ranaldo, 2009) focus on increasing financial integration at the international level. Studies that span asset classes such as sovereign bond and equity markets (e.g., Connolly et al, 2005;Yang et al, 2009;Baele et al, 2010;Baker and Wurgler, 2012;and Bansal et al, 2014) or sovereign bond, corporate bond and equity markets at the aggregate level (e.g., Baur and Lucey, 2009;Brière et al, 2012) document the evolution of financial integration and flight to low-risk sovereign bonds in market downturns.…”

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confidence: 99%

Investor sentiment, flight-to-quality, and corporate bond comovement

Bethke

Gehde-Trapp

Kempf

2017

Journal of Banking & Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractWe examine the dynamics of bond correlation using a broad sample of US corporate bonds, and document that bond correlation varies heavily over time. We attribute this variation in bond correlation to variation in risk factor correlation reflecting time-varying flight-to-quality behavior of investors. We show that risk factor correlation increases when investor sentiment decreases, i.e., corporate bond investors exhibit stronger flight-to-quality when their sentiment is low. Thus, low investor sentiment leads to flightto-quality behavior and, ultimately, high bond correlation.JEL classification: G11; G12

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“…They conclude that the introduction of euro emerged as a major factor in fostering integration in the bond markets of both small and large euro area economies. Similarly, Skintzi and Refenes (2006) report that for most European bond markets, the introduction of the euro has strengthened the volatility spill over effects and the cross-correlations which were measured using the Dynamic Conditional Correlation (DCC) framework. Kim et al (2006a) employ a set of three complementary techniques: dynamic co-integration, Haldane and Hall method, and time varying correlations.…”

Section: Literature Reviewmentioning

confidence: 99%

Time-Varying Bond Market Integration in EMU

Gupta

Sehgal

Deisting

2015

JEI

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We examine the level and progress of bond market integration amongst the eleven Economic and Monetary Union countries with active bond markets, over normal and crisis periods. The study covers data from January 2002 up to March 2014. We employ seven indicators for assessing integration, namely beta convergence, sigma convergence, variance ratio, Asymmetric Dynamic Conditional Correlation, dynamic co-integration, market synchronisation, and common factors approach. The results suggest that there is no heterogeneity in the integration process of large-sized economies and medium-sized economies, thereby restricting portfolio diversification potential. Further, bond market integration in the Economic and Monetary Union deteriorated during the crisis period, especially during the European debt crisis, with the economies of Greece, Ireland, Italy, Portugal, and Spain being the worst affected. We observe that bond markets take a lead in information linkages vis-à-vis stock markets, and hence should get precedence in policy intervention relating to market integration, development, and crisis management.

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Volatility spillovers and dynamic correlation in European bond markets

Cited by 89 publications

References 30 publications

Sovereign bond yield spillovers in the Euro zone during the financial and debt crisis

Sovereign bond yield spillovers in the Euro zone during the financial and debt crisis

Investor sentiment, flight-to-quality, and corporate bond comovement

Time-Varying Bond Market Integration in EMU

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