Pricing sovereign bond risk in the European Monetary Union area: an empirical investigation

Afonso, António, Arghyrou, Michael G. ORCID: https://orcid.org/0000-0001-6222-5086 and Kontonikas, Alexandros 2014. Pricing sovereign bond risk in the European Monetary Union area: an empirical investigation. International Journal of Finance and Economics 19 (1) , pp. 49-56. 10.1002/ijfe.1484

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Abstract

We use a panel of 10 euro area countries to assess the determinants of long‐term sovereign bond yield spreads over the period 1999.01–2010.11. We find that government bond yield spreads are well explained by fiscal fundamentals over the crisis period. We also find that the menu of risk factors priced by markets has been significantly enriched since March 2009, including international risk, liquidity risk and the risk of the crisis' transmission among European Monetary Union member states. Finally, we find that transmission risk has increased considerably since spring 2009 because of rapidly increasing risk of investing in periphery bonds relative to core ones.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HG Finance
Publisher:	Wiley
ISSN:	1076-9307
Date of First Compliant Deposit:	30 March 2016
Date of Acceptance:	18 October 2013
Last Modified:	06 Nov 2023 20:37
URI:	https://orca.cardiff.ac.uk/id/eprint/64936

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