Resumen de Conditional Return Asymmetries in the Sovereign-Bank Nexus
We estimate the time-varying skewness of European banks' stock and sovereign bond returns using quantile methods. We obtain a negative relationship between sovereigns' and banks' return asymmetries, which we relate to the safe haven features of sovereign debt. However, this feature reverses for peripheral European countries (GIIPS). Furthermore, although better capitalized and less risky banks tend to offer less negatively skewed stock returns, these benefits do not reach similarly strong GIIPS-headquartered banks. Finally, we identify a risk premium related to sovereign negative skewness for both large financial and non-financial European firms, which is stronger for firms headquartered in GIIPS.
