Open Access Open Access  Restricted Access Subscription or Fee Access

Impact of the Credit Rating Revision on the Eurozone Stock Markets

Mohamed Ali Trabelsi, Salma Hmida


The contagion generated by the US subprime crisis and the European sovereign debt crisis that hit the Eurozone stock markets is still a highly debated subject. In this paper, we try to analyze the revision effect of the credit ratings of the Eurozone countries.

To this end, we used a bivariate DCC-GARCH model to measure the extent of dynamic correlations between stock returns of our sample. Our results indicate that credit ratings revisions have a relatively limited effect on the dynamic correlations of the Eurozone stock markets.


Financial contagion; European debt crisis; Dynamic conditional correlations

Full Text:



Afonso A., Furceri D. & Gomes P. (2012). Sovereign credit rating and financial markets linkages, application to European data, Journal of International Money and Finance, 31(3), pp. 606-638.

Andenmatten S. & Brill F. (2011). Measuring comovements of CDS premia during the Greek debt crisis, Discussion Paper, No. 11-04. University of Bern, Department of Economics.

Arezki R, Candelon B. & Sy A.V.R (2011). Sovereign rating news and financial market spillovers, evidence from European debt crisis, IMF working papers.

Bartram S, Taylor S.J. & Wang Y. (2007). The euro and European financial market dependence», Journal of Banking and Finance, 51(5), pp.1461-1481.

Bollerslev T. & Wooldridge J.M. (1992). Quasi Maximum Likelihood Estimation and Inference in Dynamic Models with Time Varying Covariances, Econometric Reviews, 11, pp. 143-172.

Briere M., Chapelle A. & Szafaz A. (2012). No contagion, only globalization and flight to quality », Amundi Asset Management Working Paper 023.

Caporin M., Pelizzon L., Ravazzolo F. & Rigobon R. (2013). Measuring sovereign contagion in Europe», NBER Working Paper 18741.

Chiang T.C., Jeon B.N. & Li H. (2007). Dynamic analysis of financial contagion: evidence from Asian Markets », Journal of International money and Finance, 26, pp. 1206-1228.

Claeys P. & Vasicek B. (2014). Measuring bilateral spillover and testing contagion on sovereign bond markets in Europe, Journal of Banking & Finance, pp. 151–165.

Collins D. & Biekpe N. (2003). Contagion: a fear for African equity markets?, Journal of Economics and Business 55, pp.285-297.

Connor G. & Suurlaht A. (2013). Dynamic stock market covariances in the Eurozone. Journal of International Money and Finance 37, pp. 353-370.

Ehrmann M. & Fratzscher M. (2016). Euro area government bonds-Fragmentation and contagion during the sovereign debt crisis, Journal of International Money and Finance, 70, pp. 26-44.

Engle R.F & Sheppard K. (2001). Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH, NBER Working Paper 8554.

Engle R.F. (2002). Dynamic conditional correlation: A simple class of multivariate generalized autoregressive conditional heteroscedasticity models, Journal of Business and Economic Statistics, 20(3), pp. 339-350.

Forbes K. & Rigobon R. (2002). No contagion, only interdependence: Measuring stock market co-movements, Journal of Finance, 57(5), pp. 2223-2261.

Fratzscher M. (2002). Financial market integration in Europe: on the effect of EMU on stock markets, International Journal of Finance and Economics, 7(3), pp. 165-193.

Horta P. (2012). Contagion effect in the European NYSE Euronext stock market in the context of the 2010 sovereign debt crisis, CEFAGEUE Working paper.

Iankova E., Pochon F. & Teiletche J. (2009). L’impact des décisions des agences de notation sur les prix des actions : Une comparaison du cas français avec les cas européen et américain, Economie Et Prévision, 188, pp. 1-21.

Kalbaska A. & Gatkowski M. (2012). Eurozone sovereign contagion: evidence from the CDS market (2005-2010), Journal of Economic Behavior and Organization, 83(3), pp. 657-673.

Kerourgios D. (2014). On financial contagion and implied market volatility, International Review of financial analysis, 34, pp. 21-30

Kizys R. & Pierdzioch C. (2011). The financial crisis and the stock markets of the CEE countries, Czech Journal of Economics and Finance, Charles University Prague, Faculty of social Sciences, 61(2), pp. 153-172.

Metiu N. (2012). Sovereign risk contagion in the Eurozone, Economic Letter 117 (1), pp. 35– 38.

Missio S. & Watzka S. (2011). Financial contagion and the European debt crisis, CESifo, Munich, Germany. Working Paper 3554.

Papavassiliou V.G. (2014). Cross-Asset contagion in Times of Stress, Journal of Economics and Business, 76, pp. 133-139.

Samitas A. & Tsakalos I. (2013). How can a small country affect the European economy, The Greek contagion phenomenon, Journal of International Financial Markets, Institutions and Money, 25(6), pp. 18-32.

Savva C.S. (2009). International stock markets interactions and conditional correlations. Journal of International Financial Markets, Institutions and Money, 19(4), pp. 645-661.

Trabelsi M.A. (2012). The impact of the sovereign debt crisis on the Eurozone countries, Procedia- Social and Behavioral Sciences, 62, pp. 424-430.

Trabelsi M.A. & Hmida S. (2018). A Dynamic Correlation Analysis of Financial Contagion: Evidence from the Eurozone Stock Markets, Entrepreneurial Business and Economics Review, 6(3), pp. 129-141.

Tse Y. K. & Tsui A.K.C. (2002). A multivariate GARCH model with time-varying correlations, Journal of Business and Economic Statistics, 20, pp. 351-362.



  • There are currently no refbacks.

"Transition Studies Review" ISSN online 1614-4015 / ISSN print 1614-4007

All publishing rigths reserved to © Transition Academia Press. Executive editor: Prof. Dr. Giorgio Dominese