Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/238915 
Year of Publication: 
2018
Citation: 
[Journal:] Journal of Risk and Financial Management [ISSN:] 1911-8074 [Volume:] 11 [Issue:] 4 [Publisher:] MDPI [Place:] Basel [Year:] 2018 [Pages:] 1-19
Publisher: 
MDPI, Basel
Abstract: 
This paper analyses the determinants of euro area non-financial corporate bonds since the early 2000s, so as to gauge deviations from the law of one price. We decompose the spread between the yield of German, French, Italian and Spanish corporate bonds vis-à-vis the German Bund of similar maturity into country, credit and duration risk premia components via dummy regressions. We highlight three main findings. First, the initial phase of the financial crisis (2008-2009) caused an overall increase in credit risk premia. Since the beginning of 2013 credit risk premia are back to levels comparable to those preceding the financial crisis. Second, at the height of the euro area sovereign crisis (2011-2012), high credit risk premia were accompanied by strong and persistent signs of market fragmentation in Italy and Spain (but not in France). This fragmentation has reached its peak in the second half of 2012 and has started to recede only after the announcement of the OMT. Third, we provide a simple measure of financial integration across the big 4 member states of the euro area.
Subjects: 
financial integration
credit risk
country premia
fragmentation index
JEL: 
E43
G12
G24
C23
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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