Essays on Announcement and Contagion Effects during the Eurozone Crisis

Starting in Greece on 2009, the Eurozone crisis had generated considerable suffering, with negative economic growth in all of the Eurozone countries and unemployment rates in some exceeding 26 percent. In this dissertation, a number of hypotheses regarding the announcement effect and contagion effect during the Eurozone crisis were investigated. There are several major findings. First, results suggested that markets had asymmetric reactions to good and bad news during the sample period. Second, markets had asymmetric responses to various types of news. Third, there was a substantial structural break in the relationship between announcements and markets following Mario Draghi's 2012 statement. Fourth, markets had asymmetric responses to announcements made by different regional and international institutions, as well as national governments. Fifth, in the Eurozone crisis, most large changes in the risk premia of the major crisis countries were associated with major news and markets did not appear to exhibit extreme pessimism. Sixth, inconsistent with the conventional view, results suggested that contagion from Greece to the other major crisis countries were stronger in the second Greek crisis rather than in the first Greek crisis.