Asymmetric correlation of sovereign bond yield dynamics in the Eurozone

Abstract

This paper examines the symmetry of correlation of sovereign bond yield dynamics between eight Eurozone countries (Austria, Belgium, France, Germany, Ireland, Italy, Portugal, and Spain) in the period from January 3, 2000 to August 31, 2011. Asymmetry of correlation is investigated pair-wise by applying the test of Yongmiao Hong, Jun Tu, and Guofu Zhou (2007). Whereas the test of Hong, Tu, and Zhou (2007) is static, the present paper provides also a dynamic version of the test and identifies time periods when the correlation of Eurozone sovereign bond yield dynamics became asymmetric. We identified seven pairs of sovereign bond markets for which the null hypothesis of symmetry in correlation of sovereign bond yield dynamics can be rejected. Calculating rolling-window exceedance correlation, we found that the time-varying upper- (i.e. for positive yield changes) and lower-tail correlations (i.e. for negative yield changes) for pair-wise observed sovereign bond markets normally follow each other closely, yet during some time periods (for most pair-wise observed countries, these periods are around the September 11 attack on the New York City WTC and around the start of the Greek debt crisis) the difference in correlation does increase. The results show that the upper- and lower-tail correlation was symmetric before the Eurozone debt crisis for most of the pair-wise observed sovereign bond markets but has become much less symmetric since then.

Keywords

obveznice;korelacije;finančna kriza;ekonometrični modeli;EU;

Data

Language:	English
Year of publishing:	2013
Typology:	1.01 - Original Scientific Article
Organization:	UM EPF - Faculty of Economics and Business
UDC:	338.124.4:336.763.33(061.1EU)
COBISS:	11605788
ISSN:	1452-595X
Views:	767
Downloads:	298
Average score:	0 (0 votes)
Metadata:

Other data

Secondary language:	Slovenian
Secondary keywords:	obveznice;korelacije;finančna kriza;ekonometrični modeli;EU;
URN:	URN:SI:UM:
Type (COBISS):	Scientific work
Pages:	str. 775-789
Volume:	ǂVol. ǂ60
Issue:	ǂno. ǂ6
Chronology:	2013
DOI:	10.2298/PAN1306775D
ID:	10851712