Abnormal returns and systemic risk: evidence from a non-parametric bootstrap framework during the European sovereign debt crisis

Abstract

We investigate the impact of European Central Bank (ECB) interventions on major European and Turkish stock and credit default swap (CDS) markets highlighting the importance of abnormal to excess abnormal returns in the systemic risk. In particular, we examine the impact of ECB announcements (news) on major European and Turkish financial markets (stocks and CDSs indices) for a high and low-volatility period, i.e., from November 6th, 2008 to December 31st, 2015. We also examine the market efficiency by using both an event study methodology and the Capital Asset Pricing Model. Moreover, the impact of the ECB events is measured by an event study and a systemic risk analysis. The results show that investors exposed to Finland, Sweden, Austria and Spain tend to be more vulnerable to risk and volatility, when ECB announcements are published.