Bank sovereign bond holdings, sovereign shock spillovers, and moral hazard during the European crisis

Andrea Beltratti and René Stulz

No 21150, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: From 2010 to 2012, the relation between bank stock returns from European Union (EU) countries and the returns on sovereign CDS of peripheral (GIIPS) countries is negative. We use days with tail sovereign CDS returns of peripheral countries to identify the effects of shocks to the cost of borrowing of these countries on EU banks from other countries. A CDS tail return affects banks with greater exposure to the country experiencing that return more, but it has an impact on banks regardless of exposure. Shocks to peripheral countries that are more pervasive impact the returns of banks from countries that experience no shock more than shocks to small individual peripheral countries. In general, the impact of tail returns is asymmetric in that banks suffer less from adverse shocks to peripheral countries than they gain from favourable shocks to such countries.

JEL-codes: F34 G12 G15 G21 H63 (search for similar items in EconPapers)
Date: 2015-05
New Economics Papers: this item is included in nep-cfn, nep-eec, nep-fmk and nep-opm
Note: CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://www.nber.org/papers/w21150.pdf (application/pdf)

Related works:
Working Paper: Bank Sovereign Bond Holdings, Sovereign Shock Spillovers, and Moral Hazard durning the European Crisis (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:21150

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w21150

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().