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A Regime Switching Explanation of the Reactions of Market Participant during the Crisis

Journal of Economics Bibliography

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Title A Regime Switching Explanation of the Reactions of Market Participant during the Crisis
 
Creator FAKHRY, Bachar; University of Bedfordshire Business School, Park Square, Luton, LU1 3JU, UK
 
Subject Overreaction/Underreaction Hypothesis; Regime Switching; SWARCH; Sovereign Debt Market; Crises.
C13; C58; D53; D81; G01; G02; G15; H63.
 
Description Abstract. Empirical evidence suggest that markets are too volatile to be efficient, essentially this means the influencing factor in the pricing of assets is the reaction of market participants to the information or events, rather than the actual information. Hence in order to understand the pricing of assets, there is a need to include the behavioural finance theory. An influencing observation during the recent financial and sovereign debt crises as well as the pre-crisis period is that market participants seem to be reacting to the general financial environment. We use the SWARCH model of Cai (1994) to analyse the reaction of market participants in six key sovereign debt markets (i.e. US, German, Greek, Italian, Spanish and Portuguese) in a fast changing and highly volatile environment. In general, the evidence seems to be pointing at a change in the reaction of the market participants reflecting the underlying fast changing and highly volatile environment.Keywords. Overreaction/Underreaction Hypothesis, Regime Switching, SWARCH, Sovereign Debt Market, Crises.JEL. C13, C58, D53, D81, G01, G02, G15, H63.
 
Publisher Journal of Economics Bibliography
 
Contributor —
 
Date 2016-09-18
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://www.kspjournals.org/index.php/JEB/article/view/926
10.1453/jeb.v3i3.926
 
Source Journal of Economics Bibliography; Vol 3, No 3 (2016): September; 434-449
2149-2387
 
Language eng
 
Relation http://www.kspjournals.org/index.php/JEB/article/view/926/1040
 
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