Testing Contagion with Propensity Matching Estimators: A Three Country Empirical Example

European Journal of Scientific Research, 122(1): 107-113

7 Pages Posted: 23 Dec 2014

See all articles by Edgardo Cayon Fallon

Edgardo Cayon Fallon

Colegio de Estudios Superiores de Administracion

Julio Sarmiento-Sabogal

Pontificia Universidad Javeriana

Date Written: 2014

Abstract

We analyse the effect of the Global Financial Crisis (GFC) on portfolios of USD denominated sovereign bonds. We use propensity matching estimators in order to measure the average difference in the volatility of sovereign spreads between the non-crisis and crisis period. We use a parsimonious factor model of local and global variables to create a set of common observable characteristics. This setup allows us to test the hypothesis of change in prices for three countries between non-crisis and different crisis periods of the GFC via counterfactuals.

Suggested Citation

Cayon Fallon, Edgardo and Sarmiento-Sabogal, Julio, Testing Contagion with Propensity Matching Estimators: A Three Country Empirical Example (2014). European Journal of Scientific Research, 122(1): 107-113, Available at SSRN: https://ssrn.com/abstract=2541504

Edgardo Cayon Fallon

Colegio de Estudios Superiores de Administracion ( email )

Calle 35 No. 6-16
Bogota
Colombia

Julio Sarmiento-Sabogal (Contact Author)

Pontificia Universidad Javeriana ( email )

Carrera 7 # 40-62 Piso 4
FCEA-Depto de Administración
Bogota, D.C. 00001
Colombia
(57-1)3208320 ext 3156 (Phone)
(57-1)3208320 ext 3169 (Fax)

HOME PAGE: http://www.javeriana.edu.co/decisiones/Julio

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