Publicação
Spillovers across PIIGS bonds
| Resumo: | In this project we test for evidence of contagion between the bond financial markets of the so-called PIIGS countries: Portugal, Ireland, Italy, Greece and Spain, since 2005 till the end of 2011. Despite the fact we look into all yield spread maturities, the focus will be on 5 year yield spread and credit-default-swap (CDS) spreads for 5 year senior debt. The reason why, is because 5 year CDS maturity is the most relevant and tradable (Wit, J. 2006), in the market and also to allow for comparison with yields. We find return spillovers through both an event study and the Vector Autoregressive methodology (VAR). This first analysis is qualitative, and just allows to conclude about patterns or directions. The event study investigates whether sovereign yields spreads and CDS spreads in a given country, react significantly to rating announcements of other countries. The VAR, gives impulse response functions which trace the effect over 10 days of each variable (yields and CDS spreads) of each country, after a one-time unexpected shock in yields or CDS spreads of the remaining countries. Later, also in consonance with this latter methodology, Granger causality tests were performed. Finally we construct a set of dummy variables and estimate some regressions, in order to make a quantitative approach of this study and to confirm the conclusions drawn previously. |
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| Autores principais: | Ferreira, Simone Cristina de Macedo |
| Assunto: | Contagion PIIGS Debt crisis Sovereign Bond Yield CDS spreads Rating Return Spillovers Contágio Crise de dívida Yield das Obrigações Soberanas Contágio de Retornos |
| Ano: | 2012 |
| País: | Portugal |
| Tipo de documento: | dissertação de mestrado |
| Tipo de acesso: | acesso aberto |
| Instituição associada: | Universidade de Lisboa |
| Idioma: | inglês |
| Origem: | Repositório da Universidade de Lisboa |
| Resumo: | In this project we test for evidence of contagion between the bond financial markets of the so-called PIIGS countries: Portugal, Ireland, Italy, Greece and Spain, since 2005 till the end of 2011. Despite the fact we look into all yield spread maturities, the focus will be on 5 year yield spread and credit-default-swap (CDS) spreads for 5 year senior debt. The reason why, is because 5 year CDS maturity is the most relevant and tradable (Wit, J. 2006), in the market and also to allow for comparison with yields. We find return spillovers through both an event study and the Vector Autoregressive methodology (VAR). This first analysis is qualitative, and just allows to conclude about patterns or directions. The event study investigates whether sovereign yields spreads and CDS spreads in a given country, react significantly to rating announcements of other countries. The VAR, gives impulse response functions which trace the effect over 10 days of each variable (yields and CDS spreads) of each country, after a one-time unexpected shock in yields or CDS spreads of the remaining countries. Later, also in consonance with this latter methodology, Granger causality tests were performed. Finally we construct a set of dummy variables and estimate some regressions, in order to make a quantitative approach of this study and to confirm the conclusions drawn previously. |
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