بحران های مالی و انتقال ریسک بین بخش خصوصی و دولتی: شواهدی از بازارهای مالی اروپا
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|14194||2013||14 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : The Spanish Review of Financial Economics, Available online 23 October 2013
The recent financial crisis in Europe has been especially interesting, since it started mainly as a private sector (banking) phenomenon but then evolved into a public (sovereign debt) crisis. Given that prices of a financial asset must reflect the risks associated to said asset, we expect the relationship between financial markets related to “private” and “public” assets to have changed fundamentally during the crisis: private markets should have led the incorporation of information during the early years of the crisis whereas the markets for government securities should have attained preeminence during the years of the sovereign debt crisis. We investigate this change in the leading role of information (risk) incorporation by looking at the relationships between the markets for sovereign CDSs, sovereign bonds and equity for thirteen European countries during the period 2008–2012. Our results suggest that during 2008–2009 equity markets led the process of incorporation of new information but during 2010 this leading role was assumed by sovereign CDS markets, thus suggesting a private-to-public risk transfer during the subprime crisis and a reversal to a public-to-private risk transfer during the sovereign debt crisis. In supplementary analyses we show, first, that the role of CDSs with respect to the other two markets is state dependent, i.e., sovereign CDSs play a stronger role in economies with higher perceived credit risk. Second, we perform a price discovery analysis between CDS markets of the different European countries, showing evidence that during the years 2007–2009 the Spanish CDSs led the price discovery process, while the Italian and French CDSs took over in 2011, results which are consistent with trading volume in the CDS markets.
The relationship between the markets of Credit Default Swaps (hereafter CDS) and other asset markets has attracted increasing attention, especially since CDSs became liquid enough to serve as effective hedging instruments. For example, since both CDS premiums and bond spreads are measures of credit quality, the co-movement between these two markets, at least at a firm level, has been extensively documented by, e.g., Norden and Weber (2009), Blanco et al. (2005), Zhu (2006) and Forte and Peña (2009). These papers find evidence that the CDS market leads the incorporation of new information when considered along with the bond market. Also, financial theory posits that prices in an efficient stock market must reflect the default probability of firms. Thus, Bystrom (2008) and Fung et al. (2008), among others, have studied the relationship between corporate equity prices and CDS spreads and found evidence which suggests that firm specific information is embedded into stock prices before it is embedded into CDS spreads. Fung et al. (2008) additionally document that the lower the credit quality of a company the stronger the feedback effect between the CDS market and the stock market. However, the relationship between the markets of sovereign CDSs, sovereign bonds and stocks has been overlooked until very recently, probably because of the limited liquidity of some markets for sovereign CDSs. During the debt crisis of 2010 sovereign CDS markets started to receive increasing attention (e.g., Lonstaff et al., 2011 and Dieckmann and Plank, 2011, or Gündüz and Kaya, 2012) and, as a consequence, the relationship between sovereign bonds and sovereign CDSs became the focus of many analyses (see, e.g., the papers by Arce et al., 2012, Coudert and Gex, 2010, Fontana and Scheicher, 2010 and Delatte et al., 2012). However, whether, and how, these two markets are related to stock markets has, to our knowledge, not been explored (one notable exception is the paper by Chan-Lau and Kim, 2004). In principle, stock markets should react to risk factors that affect the private sector, whereas the markets for sovereign securities (bonds or CDSs) should react to risk factors which affect the public sector. Thus, we would expect that in contexts of increased risk in the private sector the stock market would be the leading market in the incorporation of information (i.e. it would react first, and then the markets for sovereign securities would react if the private risk gets transferred to the public sector). In context of increased sovereign risk the opposite would be true, that is, sovereign markets would react first and, if there is a public-to-private risk transfer, then the stock market would follow. Interestingly, the recent financial crisis provides us with a perfect testing ground for this risk transfer between markets, given that the crisis started mainly as a private sector (banking) crisis, but then, at least in Europe, it evolved into a sovereign crisis. In this paper we take advantage of this evolution to investigate the relationships (i.e. information or risk transfer) between the markets for sovereign bonds and CDSs and the stock markets for a wide sample of European countries, some of which have been affected quite substantially by the sovereign debt crisis. More specifically, we look at the process of information incorporation into the three markets in order to detect which market leads such process, and to test our hypothesis that in the early stages of the crisis private (stock) markets should lead the process whereas in the later stages the direction of the risk transfer probably changed, and sovereign markets would lead. Our results indeed confirm this hypothesis, and show that stock markets led the incorporation of information during 2008 and 2009 whereas the CDS markets seemed to take the leading role during 2010. In 2011 the stock market regains its leading role and, even though the relationships between the three markets weaken, sovereign bonds gain in importance. Further, we assess whether these relationships are state dependent, i.e., whether they depend on the level of perceived sovereign credit risk. To this end, we pool together the different countries in terms of their risk level. In line with previous research (Fontana and Scheicher, 2010 and Delatte et al., 2012), we find that CDSs play a stronger leading role in economies with higher perceived credit risk. As a final step, we study the relationship between the different European CDSs before and during the crisis. Several studies (e.g., Gündüz and Kaya, 2012, Lonstaff et al., 2011, Ang and Longstaff, 2011 and Fontana and Scheicher, 2010, or Dieckmann and Plank, 2011) have shown that there is a high level of synchronicity in the movements of sovereign credit spreads due to systemic sovereign risk. Given this, we suggest the existence of an equilibrium relationship between the CDSs of pairs of countries and estimate equilibrium (error correction) models. We find evidence that the Spanish CDS led the price discovery process during 2007–2009. During 2010, however, the different CDS markets lost their equilibrium relationship (this is understandable, given the effects on the term premiums induced by the European sovereign debt crisis) so we test, alternatively, for Granger causality to examine whether a specific market exercises some sort of price leadership. Our findings point to the German CDS market as the leader of the incorporation of risk information during 2010. In 2011 this leadership position changes again: many sovereign CDSs in our sample recover an equilibrium path and the Italian CDS, as well as the French, lead the process of price discovery. These results are consistent with trading activity in the CDS markets. Although the Sovereign debt crisis is far from being solved, during this last year it has become obvious that Greek debt restructuring will imply large losses for debt holders. ISDA has declared a Greek credit event,1 but the legitimacy of sovereign CDS settlement has been called into question during 2011 and 2012, given the ability of governments to influence the event of default. An interesting discussion about the future of CDSs can be found in Gelpern and Gulati (2012) who argue that the economic function of sovereign CDSs after Greece's situation is limited and uncertain, partly thanks to ISDA's insistence on reconciling the competing political demands of state regulators and its market constituents. European sovereign CDSs have continued to be traded though, suggesting that this view about the future of sovereign CDSs is not shared by all agents. For example, during 2012, the Italian, Spanish, French and German CDSs have been among the top ten most liquid worldwide CDSs, and as of January 2013, they are still within the top ten CDSs in terms of volume of trade.2 The rest of the paper is structured as follows. In Section 2, we briefly justify the existence of a relationship between sovereign credit markets and the domestic stock market. In Section 3, we describe our data. In Section 4, we estimate models that relate – at a country level and for pools of countries – the markets of sovereign CDSs, sovereign bonds and stocks. In Section 5, we report the results of a price discovery process among European CDSs. Finally, in Section 6 we conclude.
نتیجه گیری انگلیسی
In this paper we investigate the relationships between the markets for sovereign bonds and CDSs and the stock markets for a wide sample of European countries. We start our study by justifying the link between sovereign debt markets and stock markets, an area where limited work has been done so far. While at a firm level, finance theory suggests that an efficient stock market should incorporate information on the default probability of firms in a timely manner, there have been few attempts to measure a “country's equity”. We argue, however, that the country's firms proxy for this equity and, thus, the country's credit information should flow to stock markets (and vice versa), so a worsening credit situation of the companies should be reflected in the country's credit quality. Second, we looked at the process of information incorporation into the three markets (sovereign bonds and CDSs and stocks). Our results confirm the hypothesis that in the early stages of the crisis private (stock) markets led the process whereas in later stages the direction of the risk transfer changed and sovereign markets led this process. Our findings are in line with those of Arce et al. (2012), Coudert and Gex (2010) and Fontana and Scheicher (2010). A country-by-country analysis shows that debt markets lagged the stock markets during 2007–2009, while credit markets, CDS markets to be precise, led the incorporation of new information during 2010. During 2011, stock markets recovered the leading role in many economies and the sovereign bond market gained in importance. We find that these relationships are state dependent: CDSs played a stronger leading role in economies with higher perceived credit risk. Overall, our results are strongly consistent with a private-to-public risk transfer during the subprime crisis and a public-to-private risk transfer during the European sovereign credit crisis. Third, given the high level of commonality in sovereign credit spreads already reported in the literature, we analyze the relationship between the different European CDSs. During 2007–2009, we find CDSs of several countries obeying equilibrium relationships. Interestingly, the Spanish CDS turns out to be the market where price discovery takes place and where informed traders transact most (a result which at first may seem surprising, but which is aligned with the large observed trade volume in Spanish CDSs). During 2010, the different CDS markets lost their equilibrium relationship but we still find that movements in the German CDS Granger cause the movements in the rest of European CDSs, thus confirming a sort of German price leadership. In 2011, CDSs respond to equilibrium relationships again, but during that period Italy becomes the country in which information is embedded first, a finding which is also coherent with the behavior of trading volume. Some countries, such as Greece, Portugal and Ireland – all of them distressed economies – are not included in the 2011 price discovery analysis because of the non-stationarity of their credit swap spreads.