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Contagious speculative bubbles: A note on the Greek sovereign debt crisis

Author

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  • Renatas Kizys

    (University of Portsmouth)

  • Christian Pierdzioch

    (Helmut-Schmidt-University)

Abstract

The Greek sovereign debt crisis of 2009/2010 fostered widespread fears of contagion. We analyzed the danger of contagion by studying to which extent news to speculative bubbles in the Greek equity market spread to the equity markets of Portugal, Ireland, Italy, and Spain. To this end, we estimated a version of the present-discounted value model of equity valuation extended to include a rational stochastic speculative bubble. We then studied cross-country causal links between news to speculative bubbles. We found evidence of causality from Greece to the other countries, but no strong evidence of reversed causality. This finding implies that, as far as equity markets are concerned, movements in speculative bubbles in the Greek equity market may in fact have the potential to spread in a contagious way to the other European countries in our sample.

Suggested Citation

  • Renatas Kizys & Christian Pierdzioch, 2011. "Contagious speculative bubbles: A note on the Greek sovereign debt crisis," Economics Bulletin, AccessEcon, vol. 31(4), pages 296-296.
    • Handle: RePEc:ebl:ecbull:eb-11-00547
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    References listed on IDEAS

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    6. Kizys, Renatas & Pierdzioch, Christian, 2009. "Changes in the international comovement of stock returns and asymmetric macroeconomic shocks," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 19(2), pages 289-305, April.
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    Cited by:

    1. Go Tamakoshi & Shigeyuki Hamori, 2011. "Transmission of stock prices amongst European countries before and during the Greek sovereign debt crisis," Economics Bulletin, AccessEcon, vol. 31(4), pages 3339-3353.
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    4. Polanco-Martínez, J.M. & Fernández-Macho, J. & Neumann, M.B. & Faria, S.H., 2018. "A pre-crisis vs. crisis analysis of peripheral EU stock markets by means of wavelet transform and a nonlinear causality test," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 490(C), pages 1211-1227.

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    More about this item

    Keywords

    Speculative bubbles; Contagion; Greek sovereign debt crisis;
    All these keywords.

    JEL classification:

    • G0 - Financial Economics - - General
    • F1 - International Economics - - Trade

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