Most of the currency literature investigates the risk and return characteristics of the currency carry trade after the collapse of the Bretton Woods system. In order to gauge the long-term currency carry premium, we extend the sample to 20 currencies over the period 1900 to 2012. We find modest...

This paper examines the extent to which large swings of sovereign yields in euro area countries during the debt crisis can be attributed to fundamentals, focusing on the inherent uncertainty in bond yield models. We show that the outcomes are strongly affected by modelling choices with regard to...

This paper simultaneously analyzes wake-up-call and pure contagion of sovereign risk in the Eurozone during its recent financial crisis. Pure contagion of sovereign risk means the transmission of negative effects after a shock to a country which are not reflected in the risk pricing of...

We study the propagation of global investment risk across markets through the granular view of institutional investors. Applying the conditional value-at-risk estimation to micro-level weekly observations of international mutual funds between 2003 and 2011, we find that idiosyncratic shocks to...

The paper analyses the drivers of sovereign risk for 31 advanced and emerging economies during the European sovereign debt crisis. It shows that a deterioration in countries' fundamentals and fundamentals contagion – a sharp rise in the sensitivity of financial markets to fundamentals – are...

We examine the impact of news about Greece and news about a Greek bailout on bank stock prices in 2010 using data for 48 European banks. We identify the twenty days with extreme returns on Greek sovereign bonds and categorise the news events during those days into news about Greece and news...

Using both panel and cross-sectional models for 28 industrialized countries observed from 2001–2009, we report a number of findings regarding the determinants of the volatility of returns on cross-border asset holdings (i.e., equity and debt). Greater portfolio concentration and an increase in...

This paper argues that a stable broad money demand for the euro area over the period 1980–2011 can be obtained by modelling cross border international portfolio allocation. As a consequence, model-based excess liquidity measures, namely the difference between actual M3 growth (net of the...

We use EU sovereign bond yield and CDS spreads daily data to carry out an event study analysis on the reaction of government yield spreads before and after announcements from rating agencies (Standard & Poor’s, Moody’s, Fitch). Our results show significant responses of government bond yield...

This paper studies the international transmission of pledgeability shocks, as the recent crisis involved a negative shock to the pledgeability of assets. The paper develops a two-country portfolio model, with leveraged investors, that incorporates this type of shock and a solution approach for...