Sovereign bond market integration in the euro area: a new empirical conceptualization

Gilles Dufrénot (), Fredj Jawadi and Zied Ftiti
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Zied Ftiti: EDC Paris Business School

Annals of Operations Research, 2022, vol. 318, issue 1, No 6, 147-161

Abstract: Abstract This paper proposes a new empirical conceptualization of financial integration of sovereign bond markets in the euro area. We introduce a methodology based on the joint testing of the assumptions of efficient market and convergence/divergence of the yield spreads. We test these assumptions by proposing parametric and non-parametric techniques. We find that markets have been more fragmented than usually advocated in the literature. We also show that the information contained in the fundamentals are not always fully reflected in the spreads, which suggests that either they have insignificant effects, or that their coefficients in the spread equations appear with the wrong sign.

Keywords: Financial integration; Euro area; Sovereign bonds; Fundamentals (search for similar items in EconPapers)
JEL-codes: E43 G01 G10 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s10479-022-04847-5

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