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Niklas Wagner

is Professor of Finance and Financial Control at the University of Passau, Germany. After receiving his PhD in Finance, he held postdoctoral appointments at the Haas School of Business, U.C. Berkeley, and at Stanford GSB, thereafter finishing his habilitation doctoral degree at TU Munich. Professor Wagner has co-authored various contributions in finance, covering research in the areas of asset management, empirical asset pricing, applied financial econometrics as well as derivatives and risk management. Professor Wagner has co-edited book volumes on derivatives and risk management, currently is an associate editor of Economic Modelling, Emerging Markets Review, Finance Research Letters, the Journal of International Financial Markets, Institutions and Money, and the International Review of Financial Analysis, and is Editor-in-Chief of Studies in Economics and Finance.

http://www.wiwi.uni-passau.de/en/financial-control/team/niklas-wagner/

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Harald Kinateder; Niklas Wagner: Quantitative Easing, Unobservables, and Fundamentals in the Pricing of EMU Sovereign Debt

We study the determinants of changes in EMU sovereign bond yield spreads using a comprehensive set of observable explanatory variables including unconventional ECB monetary policy and fundamentals, both at a country-specific and a common level. We thereby employ a novel approach by jointly considering observable as well as additional unobservable time-varying factors. Our results reveal that unconventional monetary policy indeed significantly affects the pricing of EMU sovereign debt. Aggregate market liquidity has at least as much impact on yield spread changes as country-specific bond liquidity. Concerning unobservables, we find that a systematic risk premium together with country-specific turmoil factors, which explain divergence between turmoil and non-turmoil countries, explain about two-thirds of the variation in yield spread changes. A substantial underpricing of unobservable risk factors before the European sovereign debt crisis is further revealed. We conclude that fixed-income management should account for unobservable credit risk factors.

Last modified: 2018.11.30.