Economics, Econometrics and Finance
4 years ago

Sovereign default risk in Europe impacts U.S. stock market volatility.

Journal of Financial and Quantitative Analysis
Sovereign Default Risk and the U.S. Equity Market
Alexandre Jeanneret

Paper Summary

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The risk of a country not being able to pay its debts can affect stock prices globally. When a country's credit risk is high, it can lower stock prices and make them more unpredictable. This effect is strongest when the economy is struggling and companies are in financial trouble. Research shows that Europe's risk of default can impact both European and American stock markets by potentially causing an economic slowdown.