Please use this identifier to cite or link to this item: http://hdl.handle.net/2381/33562
Title: How the euro-area sovereign-debt crisis led to a collapse in bank equity prices
Authors: Hall, Stephen
Tavlas, George S.
Gibson, H.
First Published: 21-Jul-2016
Publisher: Elsevier
Citation: Journal of Financial Stability, 2016, 26, pp. 266–275
Abstract: We quantify the linkages among banks’ equity performance and indicators of sovereign stress by using panel GMM to estimate a three-equation system that examines the impact of sovereign stress, as reflected in both sovereign spreads and sovereign ratings, on bank share prices. We use data for a panel of five euro-area stressed countries. Our findings indicate that a recursive relationship between sovereigns and banks operated during the euro-area crisis. Specifically, for the five crisis countries considered shocks to sovereign spreads fed-through to sovereign ratings, which affected commercial banks’ equity-prices. Our results also point to the importance of using levels of equity prices – rather than rates of return – in measuring banks’ performance. The use of levels allows us to derive the determinants of long-run equity prices.
DOI Link: 10.1016/j.jfs.2016.07.010
ISSN: 1572-3089
Links: http://www.sciencedirect.com/science/article/pii/S1572308916300638
http://hdl.handle.net/2381/33562
Embargo on file until: 21-Jul-2018
Version: Post-print
Status: Peer-reviewed
Type: Journal Article
Rights: Copyright © 2016, Elsevier. Deposited with reference to the publisher’s open access archiving policy.
Description: The file associated with this record is under embargo until 24 months after publication, in accordance with the publisher's self-archiving policy. The full text may be available through the publisher links provided above.
Appears in Collections:Published Articles, Dept. of Economics

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