DRIVERS OF ILLIQUIDITY IN THE ASEAN SOVEREIGN BOND MARKET

We study illiquidity in ASEAN-5 sovereign bond markets from 2008 to 2019 by using an illiquidity measure, which is based on a proxy of the amount of arbitrage capital available in sovereign bond markets. Our analysis identifies three drivers of illiquidity in Singapore, namely economic policy uncertainty, the default spread and the GDP growth rate. In contrast, liquidity of all other markets is mostly not characterized by economic drivers. It appears that overall liquidity is lower in the markets outside Singapore and therefore deviations in these yield curves are higher on average and arbitrage eliminates larger deviations not immediately but in a delayed manner.We study illiquidity in ASEAN-5 sovereign bond markets from 2008 to 2019 by using an illiquidity measure, which is based on a proxy of the amount of arbitrage capital available in sovereign bond markets. Our analysis identifies three drivers of illiquidity in Singapore, namely economic policy uncertainty, the default spread and the GDP growth rate. In contrast, liquidity of all other markets is mostly not characterized by economic drivers. It appears that overall liquidity is lower in the markets outside Singapore and therefore deviations in these yield curves are higher on average and arbitrage eliminates larger deviations not immediately but in a delayed manner

Calendar effects in Bitcoin returns and volatility

We use a GARCH dummy model to study the influence of calendar effects on daily conditional returns and volatility of Bitcoin during the period 2013–2019. The Halloween, day-of-the-week (DOW), and month-of-the-year (MOY) effects are analyzed. Our results reveal no evidence of a Halloween calendar anomaly. A classical DOW effect is not present in Bitcoin returns, however, we find significantly lower risk over the weekend whilst in the beginning of the week Bitcoin's volatility is more intense. Moreover, supporting evidence of a reverse January effect is detected. Our results also show that investors’ risk drops substantially in September

REVISITING CALENDAR ANOMALIES IN BRICS COUNTRIES

We use a GARCH-dummy approach to analyze the influence of calendar anomalies on conditional daily returns and risk for BRICS countries’ stock markets during 1996 to 2018. The month-of-the-year (MOY), turn-of-the-month (TOM), day-of-the-week (DOW), and holiday effects are investigated. The most striking DOW effect is given for Tuesdays. The TOM effect is validated, while we interestingly find no evidence of a January effect. A general holiday effect is not documented, but the Indian market shows a significant pre- and a post-holiday effect, the Chinese market is anomalous before public holidays and the South African market is affected after holidays only

Sovereign bond return prediction with realized higher moments

This paper analyzes whether realized higher moments are able to predict out-of-sample sovereign bond returns using high-frequency data from the European bond market. We study bond return predictability over tranquil and crisis periods and across core and periphery markets at the index and country level. We provide fresh evidence that realized kurtosis is the dominant predictor of subsequent returns among higher moments and other predictors such as CDS spreads, short-term interest rates and implied stock market volatility. Our findings further underline that sovereign bond return predictability is stronger during crisis periods and more pronounced for bonds of lower credit ratings.University College Dubli

Safe haven in GFC versus COVID-19: 100 turbulent days in the financial markets

In this paper, we use a bivariate Dynamic Conditional Correlation Generalized Autoregressive Conditional Heteroskedasticity model within the world\u27s dominant financial asset classes— represented by sovereign bonds, commodities, and major exchange rates—to characterize the correlation within the major asset classes among the Global Financial Crisis (GFC) and COVID-19’s 100 days. Our results specify a noteworthy degradation of co-relationship within the asset classes dominant in COVID-19 compared to the GFC, especially when the VIX was at its peak, indicating massive fear among investors. We also find that gold, U.S., UK, and German sovereign bonds are a safe option for investors

Determinanten der Credit Spread Veränderungen von deutschen Mittelstandsanleihen

The Determinants of Credit Spread Changes of German SME BondsRecently, numerous Germany-based small and medium enterprises (SMEs) have issued successfully corporate bonds in the capital market. However, this segment of the capital market is still largely unexplored. In this paper we analyze the special features in the pricing of SME bonds by using two samples consisting of corporate bonds of German SMEs and DAX-listed blue chips. Concerning SMEs we find that a reduction of lending by German banks increases the credit spread. However, this relation does not hold for blue chips. Another difference is documented for traditional interest rate determinants. Changes in the steepness of the term structure and the risk-free interest rate have no effect on the change in credit spreads for SMEs, but for blue chips we find a significant relation. In contrast to blue chips, the credit spread increases for SMEs when the bond-specific illiquidity increases. Changes in implied stock market volatility and the economic environment are in both panels significant determinants. Furthermore, a principal components analysis reveals a significantly more pronounced heterogeneity of the non-observable risk factors in SMEs bonds, suggesting a lower integrity of this market segment

Gold, bonds, and epidemics:a safe haven study

The COVID-19 pandemic raised the question whether gold and sovereign bonds are a safe haven during epidemics. We study the effectiveness as safe haven during the epidemics caused by SARS, Ebola, Zika, Swine Flu, and COVID-19. To this end, this study employs a DCC-GARCH model to analyze the conditional correlations between daily returns of S&P 500 and MSCI Emerging Markets Index with gold and the major sovereign bonds. Our results show that gold is a weak safe haven for stock market investors during the epidemics, and U.S. treasuries are the safest option, followed by Japanese sovereign bonds