The European Financial Market Stress Index

Authors

  • Shaen Corbet National University of Ireland, Maynooth (NUIM)

Abstract

This research constructs and develops a financial stress index based on European financial markets. The integration of numerous sovereign states has created difficulty identifying stress in any one single financial component, but incorporating twenty-three headline European stress indicators across equities, bonds and currencies, in terms of both spreads and levels offer substantial explanatory benefits. The incorporation of a logistical framework specifically analysing the levels, volatility and co-movement of the included standardised series enables the creation of an index that adequately represents financial market stress in European. Using periods of pre-defined crisis in a logistic regression framework also aids the development of the index. The results provide evidence that the European-specific sovereign crises from 2010 to present, with particular emphasis on the mid-2011 period, have significantly over-shadowed any event that the financially-integrated Europe has previously experienced.

Keywords: European financial crisis; financial market stress indicator; liquidity; stock markets.

JEL Classifications: G01; G15

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Published

2014-01-05

How to Cite

Corbet, S. (2014). The European Financial Market Stress Index. International Journal of Economics and Financial Issues, 4(1), 217–230. Retrieved from https://www.econjournals.com/index.php/ijefi/article/view/647

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