Rebalancing or Freezes?
14:00 - 16:00
Professor Per Östberg
Lectures, talks and seminars
Essex Finance Centre
Essex Business School
Essex Finance Centre is delighted to welcome Professor Per Östberg to our weekly research seminar series to present his paper, titled 'The Sovereign Debt Crisis: Rebalancing or Freezes?'.
Using high-frequency data we document that episodes of market turmoil in the European sovereign bond market are on average associated with large decreases in trading volume. The response of trading volume to market stress is conditional on transaction costs. Low transaction cost turmoil episodes are associated with volume increases (investors rebalance), while high transaction cost turmoil periods are associated with abnormally low volume (market freezes). We find suggestive evidence of market freezes in response to shocks to the risk bearing capacity of market makers while investor rebalancing is triggered by wealth shocks. Overall, our results show that the recent sovereign debt crisis was not associated with large-scale investor rebalancing.
Please find more details of Professor Per Östberg's paper available here.
Per Östberg is an Associate Professor of Finance at the University of Zurich and the Swiss Finance Institute. Currently, his research agenda focuses on the response of financial markets to stress. In recent work he studies the causes of the recent elevated equity market correlations and the response of investors to the sovereign debt crisis. This work was recently awarded a research grant by the Swiss National Science Foundation. His work has been published in leading finance journals such as the Journal of Financial Economics, the Journal of Financial and Quantitative Analysis and the Journal of Financial Intermediation. He has published in the areas of Corporate Finance, Corporate Governance, Household Finance and the Liquidity of Financial Markets. He finished his PhD in Finance at the Stockholm School of Economics and subsequently joined the Norwegian School of Economics where he earned tenure before joining the department of Banking and Finance in Zurich. He has also chaired the European Winter Finance Summit meetings.