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Momentum, Nonlinear Price Discovery And Asymmetric Spillover: Sovereign Credit Risk And Equity Markets Of Emerging Countries And, Geoffrey M. Ngene

University of New Orleans Theses and Dissertations

In Chapter 1, I hypothesize that there is a differential response by agents to changes in sovereign credit or default risk in both quiet (low default risk) and turbulent markets (high default risk). These market conditions create two different states of the market (world) or regimes. Investors and policy makers respond differently in the two regimes but the response in the turbulent market condition is amplified as policy makers attempt to smoothen the fluctuations and uncertainty while investors rebalance their portfolios in an attempt to hedge against downside risk of wealth loss. In the two regimes, the short run and …