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

Afonso, A and Arghyrou, MG and Kontonikas, A (2014) 'Pricing sovereign bond risk in the European Monetary Union area: An empirical investigation.' International Journal of Finance and Economics, 19 (1). 49 - 56. ISSN 1076-9307

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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. © 2013 John Wiley & Sons, Ltd.

Item Type: Article
Subjects: H Social Sciences > HG Finance
H Social Sciences > HJ Public Finance
Divisions: Faculty of Social Sciences > Essex Business School
Faculty of Social Sciences > Essex Business School > Essex Finance Centre
Depositing User: Jim Jamieson
Date Deposited: 18 Nov 2016 13:07
Last Modified: 23 Jan 2019 01:15
URI: http://repository.essex.ac.uk/id/eprint/18034

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