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How are market preferences shaped?: the case of sovereign debt of stressed euro-area countries

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How are market preferences shaped? the case of sovereign debt of stressed euro-area countries. / Mamatzakis, Emmanuel; Tsionas, Efthymios.
In: Journal of Banking and Finance, Vol. 61, 12.2015, p. 106-116.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Harvard

Mamatzakis, E & Tsionas, E 2015, 'How are market preferences shaped? the case of sovereign debt of stressed euro-area countries', Journal of Banking and Finance, vol. 61, pp. 106-116. https://doi.org/10.1016/j.jbankfin.2015.08.004

APA

Mamatzakis, E., & Tsionas, E. (2015). How are market preferences shaped? the case of sovereign debt of stressed euro-area countries. Journal of Banking and Finance, 61, 106-116. https://doi.org/10.1016/j.jbankfin.2015.08.004

Vancouver

Mamatzakis E, Tsionas E. How are market preferences shaped? the case of sovereign debt of stressed euro-area countries. Journal of Banking and Finance. 2015 Dec;61:106-116. Epub 2015 Sept 11. doi: 10.1016/j.jbankfin.2015.08.004

Author

Mamatzakis, Emmanuel ; Tsionas, Efthymios. / How are market preferences shaped? the case of sovereign debt of stressed euro-area countries. In: Journal of Banking and Finance. 2015 ; Vol. 61. pp. 106-116.

Bibtex

@article{e81618aaff00463b83c72caceee2c8c3,
title = "How are market preferences shaped?: the case of sovereign debt of stressed euro-area countries",
abstract = "This paper reveals the underlying market preferences for sovereign debt of distressed euro area countries. We employ a generalised flexible market loss, as it nests both the linear and the non-linear form, as a function of the {\textquoteleft}basis{\textquoteright}, the difference between sovereign bond spread and the Credit Default Swap. Our evidence shows that market preferences lean towards pessimism for some countries, in particular Greece. Those preferences do not remain stable over time as they shift further towards pessimism post the Greek bail out in spring 2010. As part of sensitivity analysis we apply a multivariate loss function to account for contagion effects in forming market preferences among different sovereign bonds. We also examine the impact of specific financial and fiscal governance factors on market preferences. Our results suggest that the market closely monitor fiscal fundamentals so as to shape preferences.",
keywords = "Euro area sovereign debt crisis, Spreads, CDS, Loss function",
author = "Emmanuel Mamatzakis and Efthymios Tsionas",
year = "2015",
month = dec,
doi = "10.1016/j.jbankfin.2015.08.004",
language = "English",
volume = "61",
pages = "106--116",
journal = "Journal of Banking and Finance",
issn = "0378-4266",
publisher = "Elsevier",

}

RIS

TY - JOUR

T1 - How are market preferences shaped?

T2 - the case of sovereign debt of stressed euro-area countries

AU - Mamatzakis, Emmanuel

AU - Tsionas, Efthymios

PY - 2015/12

Y1 - 2015/12

N2 - This paper reveals the underlying market preferences for sovereign debt of distressed euro area countries. We employ a generalised flexible market loss, as it nests both the linear and the non-linear form, as a function of the ‘basis’, the difference between sovereign bond spread and the Credit Default Swap. Our evidence shows that market preferences lean towards pessimism for some countries, in particular Greece. Those preferences do not remain stable over time as they shift further towards pessimism post the Greek bail out in spring 2010. As part of sensitivity analysis we apply a multivariate loss function to account for contagion effects in forming market preferences among different sovereign bonds. We also examine the impact of specific financial and fiscal governance factors on market preferences. Our results suggest that the market closely monitor fiscal fundamentals so as to shape preferences.

AB - This paper reveals the underlying market preferences for sovereign debt of distressed euro area countries. We employ a generalised flexible market loss, as it nests both the linear and the non-linear form, as a function of the ‘basis’, the difference between sovereign bond spread and the Credit Default Swap. Our evidence shows that market preferences lean towards pessimism for some countries, in particular Greece. Those preferences do not remain stable over time as they shift further towards pessimism post the Greek bail out in spring 2010. As part of sensitivity analysis we apply a multivariate loss function to account for contagion effects in forming market preferences among different sovereign bonds. We also examine the impact of specific financial and fiscal governance factors on market preferences. Our results suggest that the market closely monitor fiscal fundamentals so as to shape preferences.

KW - Euro area sovereign debt crisis

KW - Spreads

KW - CDS

KW - Loss function

U2 - 10.1016/j.jbankfin.2015.08.004

DO - 10.1016/j.jbankfin.2015.08.004

M3 - Journal article

VL - 61

SP - 106

EP - 116

JO - Journal of Banking and Finance

JF - Journal of Banking and Finance

SN - 0378-4266

ER -