Financial crises, the decoupling–recoupling hypothesis, and the risk premium on the Greek stock index futures market

Christos Floros, Renatas Kizys and Christian Pierdzioch

International Review of Financial Analysis, 2013, vol. 28, issue C, 166-173

Abstract: Our results shed light on the contribution of local and regional factors to the risk premium on the Greek stock index futures market. Building upon the stochastic discount factor model, we estimate a multivariate exponential GARCH-in-mean model to uncover the risk premium on the FTSE/ASE-20 stock index futures traded in the ADEX, Greece. We provide evidence that the risk premium was mainly driven by its regional (European) component before the recent financial crisis. We also report that the local (Greek) component has become more important for the risk premium on the Greek stock index futures market after the recent debt crisis in Greece. Importantly, our results suggest that the decoupling–recoupling hypothesis, according to which the recent financial crisis has strengthened international financial links, does not apply to the risk premium on the stock index futures market. Rather, we report evidence consistent with a recoupling–decoupling hypothesis.

Keywords: Decoupling–recoupling hypothesis; Greece; Multivariate exponential GARCH-in-mean model; Risk premium; Stochastic discount factor model; Stock index futures market; FTSE/ASE-20 (search for similar items in EconPapers)
JEL-codes: C32 E32 E44 G12 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:28:y:2013:i:c:p:166-173

DOI: 10.1016/j.irfa.2013.02.005

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