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

Contagious speculative bubbles: a note on the Greek sovereign debt crisis
Contagious speculative bubbles: a note on the Greek sovereign debt crisis
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.
1545-2921
a295-a306
Kizys, Renatas
9d3a6c5f-075a-44f9-a1de-32315b821978
Pierdzioch, C.
60eb79c6-d98e-4ceb-a634-9acaf7ebc451
Kizys, Renatas
9d3a6c5f-075a-44f9-a1de-32315b821978
Pierdzioch, C.
60eb79c6-d98e-4ceb-a634-9acaf7ebc451

Kizys, Renatas and Pierdzioch, C. (2011) Contagious speculative bubbles: a note on the Greek sovereign debt crisis. Economics Bulletin, 31 (4), a295-a306.

Record type: Article

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.

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Published date: 2011

Identifiers

Local EPrints ID: 434403
URI: http://eprints.soton.ac.uk/id/eprint/434403
ISSN: 1545-2921
PURE UUID: 62818d53-07c3-4581-a092-e5a6e83164c2
ORCID for Renatas Kizys: ORCID iD orcid.org/0000-0001-9104-1809

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Date deposited: 23 Sep 2019 16:30
Last modified: 13 Dec 2021 03:33

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Contributors

Author: Renatas Kizys ORCID iD
Author: C. Pierdzioch

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