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Flight to Safety from European Stock Markets

Nektarios Aslanidis (nektarios.aslanidis@urv.cat) and Charlotte Christiansen
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Nektarios Aslanidis: Universitat Rovira i Virgili, CREIP, Postal: Universitat Rovira i Virgili, Department d´Economia, CREIP, Avinguda Universitat 1, 43204 Reus, Spain

CREATES Research Papers from Department of Economics and Business Economics, Aarhus University

Abstract: This paper investigates flight-to-safety from stocks to bonds in seven European markets. We use quantile regressions to identify flight-to-safety episodes. The simple risk-return trade-off on the stock markets is negative which is caused by flight-to-safety episodes: During normal periods, the risk-return trade-off is positive and during flight-to-safety episodes it is negative. The effects of flight-to-safety episodes on the risk-return trade-off are qualitatively similar for own country flight-to-safety episodes, for flight from own country stock market to the US bond market, and for US flight-to-safety. The strength of the trade-off is strongest for own country flight-to-safety episodes. The risk-return trade-off is not significantly influenced by recession periods or the recent sovereign debt crisis. The main results hold for flight to gold instead of to bonds.

Keywords: ?flight-to-safety; risk-return trade-off; European markets; stock market; bond market; gold futures (search for similar items in EconPapers)
JEL-codes: C58 F30 G11 G15 (search for similar items in EconPapers)
Pages: 27
Date: 2017-11-07
References: Add references at CitEc
Citations: View citations in EconPapers (3)

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https://repec.econ.au.dk/repec/creates/rp/17/rp17_38.pdf (application/pdf)

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Working Paper: Flight to Safety from European Stock Markets (2018) Downloads
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