Greek Government-Debt Crisis Events and European Financial Markets: Surprises of Greek Bond Yields and Inter-Relations of European Financial Markets
21 Pages Posted: 13 Aug 2019
Date Written: August 10, 2018
In this paper, we study the impact of Greek government-debt crisis events on European ﬁnancial markets during the European sovereign debt crisis. We examine the eﬀect of three categories of Greek government-debt crisis events in realized correlation and correlation jumps of government bonds, CDS and stock indices of seven European countries (Greece, Spain, Portugal, Ireland, Italy, Germany and France) via the respective dummy variables and news surprises of 2-year, 5-year and 10-year government bonds and CDS in a non-parametric framework by employing Tobit regression models. According to our results, the direction of most impacts on correlation and correlation jumps is negative. We also investigate the types of Greek government-debt crisis events that have the highest impacts on correlation and correlation jumps. Our ﬁndings provide valuable insight into the relationship between events related to Greek instability and European ﬁnancial markets during the European sovereign debt crisis.
Keywords: contagion, Greek debt crisis, realized correlation, correlation jumps
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