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  • Comovement between stock and bond markets and the 'flight-to-quality' during financial market turmoil - a case of the Eurozone countries most affected by the sovereign debt crisis of 2010-2011
    Dajčman, Silvo
    This article examines the comovement between stock market returns and the dynamics (i.e. changes) of sovereign bond yields for the Eurozone countries affected by the sovereign debt crisis and for ... Germany, whose sovereign bonds are normally regarded as 'safe havens' in the financial markets. To investigate whether the periods of the greatest financial market turmoil in the last decade coincided with a Flight-To-Quality (FTQ; the flight from the riskier stocks to safer sovereign bonds), a simple FTQ indicator is defined and calculated. We find that the comovement between stock market returns and the dynamics of sovereign bond yields is time varying. For Germany, the correlation between stock market returns and the dynamics of sovereign bond yields is mostly positive during the observed period, whereas for the countries affected by the sovereign debt crisis, the correlation is mostly negative, especially after the start of the sovereign debt crisis in the Eurozone. Financial crises normally coincide with higher correlations, whereas Greece's sovereign debt crisis in the Eurozone led to a reduced correlation in Ireland, Italy, Portugal and Spain. The financial market crises prior to 2010 led to an increased FTQ in all investigated countries, whereas after the start of the sovereign debt crisis in the Eurozone, the FTQ is only observed in Germany.
    Vir: Applied economics letters. - ISSN 1350-4851 (Vol. 19, no. 17, 2012, str. 1655-1662)
    Vrsta gradiva - članek, sestavni del
    Leto - 2012
    Jezik - angleški
    COBISS.SI-ID - 11308828

vir: Applied economics letters. - ISSN 1350-4851 (Vol. 19, no. 17, 2012, str. 1655-1662)

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