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Sovereign risk and the impact of crisis: evidence from Latin America

Batten, Jonathan A., Gannon, Gerard L. and Thuraisamy, Sivananthan 2017, Sovereign risk and the impact of crisis: evidence from Latin America, Journal of banking & finance, vol. 77, pp. 328-350, doi: 10.1016/j.jbankfin.2016.07.011.

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Title Sovereign risk and the impact of crisis: evidence from Latin America
Author(s) Batten, Jonathan A.
Gannon, Gerard L.
Thuraisamy, Sivananthan
Journal name Journal of banking & finance
Volume number 77
Start page 328
End page 350
Total pages 23
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2017-04
ISSN 0378-4266
Keyword(s) Argentine default
Global Financial Crisis
Latin America
volatility
spillovers
sovereign bond markets
transmission
Summary We utilize the default by Argentina in 2001 and the Global Financial Crisis in 2008, as natural experiments, to monitor the complex interactions between sovereign bonds when subjected to endogenous and exogenous shocks. By forming pairs of Latin American sovereign bonds, bundled into similar maturity class, the analysis highlights the complex nature of risk shifting, and the temporal nature of the volatility transmission and sharing mechanisms in the lead up to, and after, a crisis period. The results show that shorter maturity groups and longer maturity groups behave in fundamentally different ways in terms of volatility transmission, while one or two leading countries act as regional benchmarks. The dynamics are consistent with temporal but segmented investor preferences, with the arrival of crisis contributing to a breakdown in the previous relationships. In addition, there is additional economic benefit from utilizing knowledge of the volatility structure underlying the historic transmission channels to improve the portfolio outcomes of market participants.
Language eng
DOI 10.1016/j.jbankfin.2016.07.011
Field of Research 150202 Financial Econometrics
0102 Applied Mathematics
1502 Banking, Finance And Investment
Socio Economic Objective 970115 Expanding Knowledge in Commerce
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2016, Elsevier
Persistent URL http://hdl.handle.net/10536/DRO/DU:30086105

Document type: Journal Article
Collection: Department of Finance
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