Journal of Economics and Finance

, Volume 38, Issue 4, pp 627–642

Causality-in-variance and causality-in-mean between the Greek sovereign bond yields and Southern European banking sector equity returns



This paper adopts the robust cross-correlation function methodology developed by Hong (J Econom 103:183–224, 2001) in order to test for volatility and mean spillovers between Greek long-term government bond yields and the banking sector stock returns of four Southern European countries, namely Greece, Portugal, Italy, and Spain. Its primary focus is on investigating the potential impacts of the recent European sovereign debt crisis. While most previous studies have focused on within-country causalities, we rather assess cross-country transmission effects. The presented results provide evidence of bidirectional volatility spillovers between Greek long-term interest rates and the banking sector equities of Portugal, Italy, and Spain that emerged during the European sovereign debt crisis. We also find significant unidirectional causality-in-mean from bank stock returns in Greece to Greek long-term bond yields during the crisis period as well as significant causality at the mean level from the bank equity returns in Portugal, Italy, and Spain to Greek bond yields.


Bank Stock Returns Bond Yields Causality-In-Variance Test International Volatility Spillover Greek Sovereign Debt Crisis 

JEL Classification

G14 G15 G20 

Copyright information

© Springer Science+Business Media, LLC 2012

Authors and Affiliations

  1. 1.Graduate School of EconomicsKobe UniversityKobeJapan
  2. 2.Faculty of EconomicsKobe UniversityKobeJapan

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