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|Title:||How the euro-area sovereign-debt crisis led to a collapse in bank equity prices|
Tavlas, George S.
|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.|
|Embargo on file until:||21-Jul-2018|
|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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