Inferences from Portfolio Theory and Efficient Market Hypothesis to the Impact of Social Media on Sovereign Debt: Colombia, Ecuador, and Peru

Esteban Serrano-Monge
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Esteban Serrano-Monge: Business School, Universidad San Francisco de Quito-USFQ, Diego de Robles y Vía Interoceánica, Quito 170157, Ecuador

JRFM, 2022, vol. 15, issue 4, 1-16

Abstract: For three countries of similar economic characteristics, I ratify previous studies of the impact of fundamental macroeconomic and foreign exchange variables influencing country risk, as captured by the Emerging Market Bond Index (EMBI). I contribute to existing research, first by calculating a proxy of risk I call endogenous risk that analyzes the quarterly variability of economic activity, and second, by calculating a variable of sentiment from Twitter activity. I gauge the impact of both on the country risk metric in addition to variables in existing research about the determinants of country risk. Foreign exchange variables are the most significant determinants of risk for the countries of Colombia and Peru, which actively manage their currency, while Ecuador’s country risk is mostly affected by endogenous risk and macroeconomic fundamentals.

Keywords: efficient market hypotheses; portfolio theory; sovereign credit risk; country risk; social media (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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