Flight-to-Safety and the Risk-Return Trade-Off: European Evidence

16 Pages Posted: 7 Nov 2017 Last revised: 4 Sep 2019

See all articles by Nektarios Aslanidis

Nektarios Aslanidis

Universitat Rovira Virgili

Charlotte Christiansen

Aarhus University - CREATES

Christos S. Savva

Cyprus University of Technology - Department of Commerce, Finance and Shipping

Date Written: November 22, 2018

Abstract

This paper investigates flight-to-safety from stocks to bonds in six European markets. We use quantile regressions to identify flight-to-safety episodes. The conditional risk-return trade-off on the stock markets is negative. Flight-to-safety episodes strengthen the negative trade-off. The effects of flight-to-safety episodes on the trade-off are qualitatively similar for own country flight-to-safety episodes, for flight from own country stock market to the US bond market, and for US flight-to-safety episodes. The strength of the trade-off is strongest for US flight-to-safety episodes. Flight-from-safety has the opposite effect on the trade-off.

Keywords: Flight-to-Safety; Risk-Return Trade-Off; European Markets; Stock Market; Bond Market

JEL Classification: C58, G11, G15

Suggested Citation

Aslanidis, Nektarios and Christiansen, Charlotte and Savva, Christos S., Flight-to-Safety and the Risk-Return Trade-Off: European Evidence (November 22, 2018). Available at SSRN: https://ssrn.com/abstract=3065838 or http://dx.doi.org/10.2139/ssrn.3065838

Nektarios Aslanidis

Universitat Rovira Virgili ( email )

Tarragona
Spain

Charlotte Christiansen (Contact Author)

Aarhus University - CREATES ( email )

Fuglesangs Alle 4
Aarhus V, DK 8210
Denmark

Christos S. Savva

Cyprus University of Technology - Department of Commerce, Finance and Shipping ( email )

Limassol, 3603
Cyprus
00357252349 (Phone)
00357252674 (Fax)

HOME PAGE: http://www.csavva.com

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