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Financial crises, the decoupling–recoupling hypothesis, and the risk premium on the Greek stock index futures market

Financial crises, the decoupling–recoupling hypothesis, and the risk premium on the Greek stock index futures market
Financial crises, the decoupling–recoupling hypothesis, and the risk premium on the Greek stock index futures market
Our results shed light on the contribution of local and regional factors to the risk premium on the Greek stock index futures market. Building upon the stochastic discount factor model, we estimate a multivariate exponential GARCH-in-mean model to uncover the risk premium on the FTSE/ASE-20 stock index futures traded in the ADEX, Greece. We provide evidence that the risk premium was mainly driven by its regional (European) component before the recent financial crisis. We also report that the local (Greek) component has become more important for the risk premium on the Greek stock index futures market after the recent debt crisis in Greece. Importantly, our results suggest that the decoupling–recoupling hypothesis, according to which the recent financial crisis has strengthened international financial links, does not apply to the risk premium on the stock index futures market. Rather, we report evidence consistent with a recoupling–decoupling hypothesis.
1057-5219
166-173
Floros, Christos
c4c6c62c-8719-4688-b3d2-d46fd01581dc
Kizys, Renatas
9d3a6c5f-075a-44f9-a1de-32315b821978
Pierdzioch, Christian
60eb79c6-d98e-4ceb-a634-9acaf7ebc451
Floros, Christos
c4c6c62c-8719-4688-b3d2-d46fd01581dc
Kizys, Renatas
9d3a6c5f-075a-44f9-a1de-32315b821978
Pierdzioch, Christian
60eb79c6-d98e-4ceb-a634-9acaf7ebc451

Floros, Christos, Kizys, Renatas and Pierdzioch, Christian (2013) Financial crises, the decoupling–recoupling hypothesis, and the risk premium on the Greek stock index futures market. International Review of Financial Analysis, 28, 166-173. (doi:10.1016/j.irfa.2013.02.005).

Record type: Article

Abstract

Our results shed light on the contribution of local and regional factors to the risk premium on the Greek stock index futures market. Building upon the stochastic discount factor model, we estimate a multivariate exponential GARCH-in-mean model to uncover the risk premium on the FTSE/ASE-20 stock index futures traded in the ADEX, Greece. We provide evidence that the risk premium was mainly driven by its regional (European) component before the recent financial crisis. We also report that the local (Greek) component has become more important for the risk premium on the Greek stock index futures market after the recent debt crisis in Greece. Importantly, our results suggest that the decoupling–recoupling hypothesis, according to which the recent financial crisis has strengthened international financial links, does not apply to the risk premium on the stock index futures market. Rather, we report evidence consistent with a recoupling–decoupling hypothesis.

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More information

Accepted/In Press date: 15 February 2013
e-pub ahead of print date: 27 February 2013
Published date: June 2013

Identifiers

Local EPrints ID: 434498
URI: http://eprints.soton.ac.uk/id/eprint/434498
ISSN: 1057-5219
PURE UUID: 613caf6a-4cfc-4951-8ace-0581f0b10377
ORCID for Renatas Kizys: ORCID iD orcid.org/0000-0001-9104-1809

Catalogue record

Date deposited: 25 Sep 2019 16:30
Last modified: 09 Jan 2022 04:07

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Contributors

Author: Christos Floros
Author: Renatas Kizys ORCID iD
Author: Christian Pierdzioch

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