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Contribution Details
| Type | Working Paper |
| Scope | Discipline-based scholarship |
| Title | The Sovereign Debt Crisis: Flights or Freezes? |
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| Institution | University of Zurich |
| Series Name | SSRN |
| Number | 3060504 |
| ISSN | 1556-5068 |
| Date | 2022 |
| Abstract Text | Multiple asset pricing theories predict that large price changes should be associated with abnormal trading volume, inducing investor rebalancing and possibly leading to flights. In contrast, consistent with market microstructure theories, this paper documents freezes, a reduction in trading volume (approximately 30% relative to the previous trading week) during market stress episodes in the European sovereign bond market. We trace the market freezes to increasing transaction costs driven by reduced risk bearing capacity of market makers. |
| Free access at | Official URL |
| Digital Object Identifier | 10.2139/ssrn.3060504 |
| Other Identification Number | merlin-id:22734 |
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| Keywords | Sovereign Debt Crisis, Trading volume, Liquidity, Flights, Rebalancing |
| Additional Information | JEL Classification: G12, G14, G21, E44 |