A1168
Title: European sovereign bond and stock market Granger causality dynamics
Authors: Rubens Morita - The University of Exeter (United Kingdom) [presenting]
Zeynep Kurter - University of Warwick (United Kingdom)
Pedro Gomes - University of London Birkbeck (United Kingdom)
Abstract: The lead-lag relationship between weekly sovereign bond yield changes and stock market returns is investigated for eight European countries and how it changes during 2008-2022. A Markov-Switching Granger Causality method is used to determine reversals of causality endogenously. In all countries, there were often changes in the direction of the Granger causality between the two markets that coincided with global and idiosyncratic economic events. Stock returns led to changes in sovereign bond yields in most countries, particularly during the financial, the Euro Area crisis and the COVID-19 pandemic. In contrast with the literature, evidence is found that changes in sovereign bond yields led to stock returns in several periods.
