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1.
Nonlinear spillovers between euro area sovereign bond markets
Silvo Dajčman, 2015, original scientific article

Abstract: This paper examines nonlinear spillover effects between sovereign bond markets of six euro area countries (France, Ireland, Italy, Germany, Portugal, and Spain), four of which were among the hardest hit by the sovereign debt crisis, by applying a nonlinear Granger causality test of Diks and Panchenko (2006). The test is applied on the sovereign bond yield dynamics (i.e. yield changes) time series for the time period from 3 January 2000 - 31 August 2011. We also test for ˝pure˝ spillovers between sovereign bond yield dynamics, i.e. the spillovers after controlling for common and regional factors that impact the sovereign bond yield changes of all countries simultaneously. To verify if the nature of spillovers has changed after the start of the euro are sovereign debt crisis, we test for the nonlinear spillovers for the whole observed period and separately for the period be fore and after the start of the euro area sovereign debt crisis (period from the start of April 2010 until the end of our sample, i.e. 31 August 2011). The results of our study show that strong bi-directional Granger causality exists between the investigated sovereign bond markets. Very similar results are obtained whether the regional and world factors are or are not controlled for. We find strong bi-directional non-linear Granger causality for the investigated euro area countries prior the euro area sovereign debt crisis. After the start of the euro area sovereign debt crisis the interdependence be- tween the markets has reduced. We can no longer detect non-linear spillovers running from Germany and France to the ˝periphery˝ euro area countries. The findings of this study have important implications for the policymakers as they show that shocks spill-over quickly across the sovereign bond markets and the intensity and nature of spillovers can change throughout time. The sovereign bond markets of the ˝core˝ euro area decoupled from the ˝periphery˝ euro area sovereign bond markets after the start of euro are debt crisis. The findings are also of relevance for individual investors in the sovereign bond markets for the purpose of portfolio diversification.
Keywords: stock exchanges, bonds, financial crisis, econometric models, EU, sovereign bond markets, spillovers, non-linear Granger causality
Published: 07.08.2017; Views: 222; Downloads: 60
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2.
Dependence between Croatian and European stock markets
Silvo Dajčman, 2013, original scientific article

Abstract: The objective of this paper is to analyze dependence structure between the returns of Croatian and five European stock markets (Austrian, French, German, Italian, and the U.K.ʼs). We propose a copula GARCH approach, where the return series are modeled as univariate GARCH processes and the dependence structure between the return series is defined by a copula function. Four different copulas are fitted - a constant and conditional normal and symmetric Joe-Clayton (SJC) copulas - and estimated by a semi-parametric method. We found that the time-varying normal copula yields the best fit for CROBEX-CAC40, CROBEX-DAX, and CROBEX-FTSE-MIB stock indices pairs, while the time-varying SJC copula is the best fit for CROBEX-ATX and CROBEX-FTSE100. Further, we found that the probability of simultaneous extreme positive and negative returns in Croatian and other European stock markets can increase to 0.77 during turbulent times. The lower and upper tail dependence dynamics between Croatian and other European stock markets is similar in pattern, differing only in scale. The basic conclusion of the research is that the dependence between the stock markets of Croatia and five major European stock markets is dynamic and can be properly captured by either a dynamic normal or symmetrized Joe-Clayton copula GARCH models.
Keywords: stock market, stock companies, econometric models, Croatia, EU, dependence, copula GARCH
Published: 17.07.2017; Views: 206; Downloads: 59
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