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Wealth-to-income ratio, government bond yields and financial stress in the Euro Area

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  • Ricardo M. Sousa

Abstract

I show that when the ratio of asset wealth to human wealth, wy , falls, investors become more exposed to idiosyncratic shocks and demand a higher government bond risk premium. Using data for the Euro Area as a whole and conditioning the forecasting ability of wy on the financial stress conditions, one is able to track better future time-variation in risk premium.

Suggested Citation

  • Ricardo M. Sousa, 2012. "Wealth-to-income ratio, government bond yields and financial stress in the Euro Area," Applied Economics Letters, Taylor & Francis Journals, vol. 19(11), pages 1085-1088, July.
    • Handle: RePEc:taf:apeclt:v:19:y:2012:i:11:p:1085-1088
    DOI: 10.1080/13504851.2011.613751
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    Cited by:

    1. Margot Quijano, 2013. "Consumption, change in expectations and equity returns," Applied Financial Economics, Taylor & Francis Journals, vol. 23(24), pages 1839-1851, December.
    2. Gnegne, Yacouba & Jawadi, Fredj, 2013. "Boundedness and nonlinearities in public debt dynamics: A TAR assessment," Economic Modelling, Elsevier, vol. 34(C), pages 154-160.
    3. Fredj Jawadi & Ricardo M. Sousa, 2013. "Structural breaks and nonlinearity in US and UK public debts," Applied Economics Letters, Taylor & Francis Journals, vol. 20(7), pages 653-657, May.
    4. Luca Agnello & Vitor Castro & João Tovar Jalles & Ricardo M. Sousa, 2016. "Financial stress and sovereign debt composition," Applied Economics Letters, Taylor & Francis Journals, vol. 23(9), pages 678-683, June.
    5. Tsai, I-Chun, 2015. "Dynamic information transfer in the United States housing and stock markets," The North American Journal of Economics and Finance, Elsevier, vol. 34(C), pages 215-230.
    6. Ren, Yu & Yuan, Yufei & Zhang, Yang, 2014. "Human capital, household capital and asset returns," Journal of Banking & Finance, Elsevier, vol. 42(C), pages 11-22.

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