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Transmission Channels of Financial Shocks to Stock, Bond, and Asset-Backed Markets: An Empirical Model

  • Viola Fabbrini
  • Massimo Guidolin
  • Manuela Pedio

Table of contents

  1. Front Matter
    Pages i-x
  2. Viola Fabbrini, Massimo Guidolin, Manuela Pedio
    Pages 1-12
  3. Viola Fabbrini, Massimo Guidolin, Manuela Pedio
    Pages 13-27
  4. Viola Fabbrini, Massimo Guidolin, Manuela Pedio
    Pages 28-37
  5. Viola Fabbrini, Massimo Guidolin, Manuela Pedio
    Pages 38-49
  6. Viola Fabbrini, Massimo Guidolin, Manuela Pedio
    Pages 50-67
  7. Viola Fabbrini, Massimo Guidolin, Manuela Pedio
    Pages 68-93
  8. Viola Fabbrini, Massimo Guidolin, Manuela Pedio
    Pages 94-118
  9. Viola Fabbrini, Massimo Guidolin, Manuela Pedio
    Pages 119-123
  10. Back Matter
    Pages 124-131

About this book

Introduction

Researchers, policymakers and commentators have long debated the patterns through which adverse shocks in a few markets may quickly spread to a range of apparently disconnected financial markets causing widespread losses and turmoil. This book uses modern linear and non-linear econometric methods to characterize how shocks to the yield of risky fixed income securities, such as sub-prime asset-backed or low-credit rating sovereign bonds, are transmitted to the yields in other markets. These include equity and corporate bond markets as well as relatively risk-free fixed income securities, such as highly rated asset-backed securities and sovereign bonds from core Eurozone countries. The authors analyse and compare the results from linear and non-linear models to identify and assess four distinct contagion channels characterizing both US and European financial markets. These include the correlated information, risk premium, flight-to-liquidity, and flight-to quality channels. The results of this study support the theory that both investors and policy-makers ought to pay special attention to liquidity and commonalities in the perceptions of the probabilities of default, as channels through which financial shocks propagate.

Keywords

asset backed securities Bonds Corporate Bonds econometrics methods Rating Treasury

Authors and affiliations

  • Viola Fabbrini
    • 1
  • Massimo Guidolin
    • 1
  • Manuela Pedio
    • 1
  1. 1.Bocconi UniversityItaly

Bibliographic information

  • DOI https://doi.org/10.1007/978-1-137-56139-8
  • Copyright Information Palgrave Macmillan, a division of Macmillan Publishers Limited 2016
  • Publisher Name Palgrave Macmillan, London
  • eBook Packages Business and Management
  • Print ISBN 978-1-349-85102-7
  • Online ISBN 978-1-137-56139-8
  • Buy this book on publisher's site