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Contagion effects during financial crisis: Evidence from the Greek sovereign bonds market

Author

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  • Pragidis, I.C.
  • Aielli, G.P.
  • Chionis, D.
  • Schizas, P.

Abstract

In this study, we test for the possible contagion effects of the 10-year Greek government bond yield. We first employ the well-documented adjusted correlation coefficient of Forbes and Rigobon (2002) and then we estimate an exponential generalized autoregressive conditional heteroskedasticity model extended for volatility spillovers. Finally, we propose an extension of the corrected Dynamic Conditional Correlation (cDCC) model, which allows for structural breaks in the correlation dynamics. The suggested cDCC specification provides a natural testing framework for the correlation contagion hypothesis. Compared with other similar approaches, the proposed structural break cDCC approach allows for consistent inferences. The results do not confirm any contagious effects stemming from the 10-year Greek sovereign bond.

Suggested Citation

  • Pragidis, I.C. & Aielli, G.P. & Chionis, D. & Schizas, P., 2015. "Contagion effects during financial crisis: Evidence from the Greek sovereign bonds market," Journal of Financial Stability, Elsevier, vol. 18(C), pages 127-138.
    • Handle: RePEc:eee:finsta:v:18:y:2015:i:c:p:127-138
    DOI: 10.1016/j.jfs.2015.04.001
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