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Dependence between Stock Returns of Italian Banks and the Sovereign Risk

Author

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  • Fabrizio Durante

    (Dipartimento di Scienze dell’Economia, Università del Salento, 73100 Lecce, Italy)

  • Enrico Foscolo

    (Faculty of Economics and Management, Free University of Bozen-Bolzano, 39100 Bozen-Bolzano, Italy)

  • Alex Weissensteiner

    (Faculty of Economics and Management, Free University of Bozen-Bolzano, 39100 Bozen-Bolzano, Italy)

Abstract

We analyze the interdependence between the government yield spread and stock returns of the banking sector in Italy during the years 2003–2015. In a first step, we find that the Spearman’s rank correlation between the yield spread and the Italian banking system changed significantly after September 2008. According to this finding, we split the time window in two sub-periods. While we show that the dependence between the banking industry and changes in the yield spread increased significantly in the second time interval, we find no contagion effects from changes in the yield spread to returns of the banking system.

Suggested Citation

  • Fabrizio Durante & Enrico Foscolo & Alex Weissensteiner, 2017. "Dependence between Stock Returns of Italian Banks and the Sovereign Risk," Econometrics, MDPI, vol. 5(2), pages 1-14, June.
    • Handle: RePEc:gam:jecnmx:v:5:y:2017:i:2:p:23-:d:100926
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    References listed on IDEAS

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    Cited by:

    1. Piotr Jaworski & Kamil Liberadzki & Marcin Liberadzki, 2017. "Contagion And Divergence On Sovereign Bond Markets," Copernican Journal of Finance & Accounting, Uniwersytet Mikolaja Kopernika, vol. 6(4), pages 39-68.

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