Dynamic Analysis Of The European Sovereign Credit Rating Downgrades Shocks On The International Stock Markets

By the end of 2009, the ratio of Greek government ’s budget deficit and public debt to gross domestic product(GDP) far exceeded the upper limit, the world’s three major rating agencies, Standard & Poor’s, Moody’s and Fitch downgraded Greece ’s sovereign credit rating, the Greek debt crisis bursted. Then Italy, Spain, Portugal and Ireland ’s ratings have been lowered, the Greek debt evolved into the European national economies and dependence gradual increase in financial liberalization environment,and therefore, the outbreak of the debt crisis in one country, one region could shake the global economy, triggered a global financial crisis, as well as how to prevent the financial crisis, maintaining the stability of financial markets have become the focus of academic research.Firstly, we study the theory of the debt crisis, the origins of the crisis, the diffusion and impact on the global economy, and then through the relevant literature research, combined with the theoretical background and the reality of the debt crisis,we empirically research transnational contagious crisis. Since the stock market is an important way of financial contagion, the paper first use event study method, select the sample from December 2009 to June 2012, the EU countries’ stock price gains, find that sovereign credit downgrades have a significant impact on the EU countries on the basis of stock price gains. Further we research the impact of the debt crisis in the United States and Asian countries, and compare the results of different impact rating downgrades for each stock market. About Asia and the U.S. stock market, we found that Asian economies dependent on trade is the main reason to make it at risk, the EU is irreplaceable export markets in Asia, if the European economic system crashes,international trade stagnation, consumer credit dried up, the stock market decline is inevitable. Thus, in this crisis, export-dependent countries such as Singapore, Hong Kong, Korea, Japan, Taiwan and China has been impacted of the weak European economy. U.S. stocks also did not thriving.Then, using asymmetric GARCH model,we empirically analysis the European debt crisis of EU area representative countries, the United States and Asian countries stock price volatility trends.In times of crisis, the eight countries in Europe, the bad news shock the Greek stock market, followed by Portugal and Ireland ’s stock market,the last is the German stock market. Another study found outside the European market,bad news shock the U.S. stock market, followed by the Japanese stock market, the last is China’s stock market. Because in the crisis era, the stock markets of developed countries, high degree of freedom greater market volatility than the stock markets of developing countries. Finally, through the stock market dynamic correlation coefficient,we found that crises country suffer risk more.