3 Issuing costs of state guaranteed bonds - Financial Risk and ...

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Annex 4 of diagnostic tests of issuing cost model Annex 4 Results of diagnostic tests of issuing cost model A4.1 Normality of residuals The residuals were found to be approximately normal. There was little evidence of deviation from normality on the basis of inspection of the standardised normal probability plot. Figure 22: Standardised normal probability plot of residuals of main issuing cost model 156 Normal F[(r_new-m)/s] 0.00 0.25 0.50 0.75 1.00 0.00 0.25 0.50 0.75 1.00 Empirical P[i] = i/(N+1) A4.2 Multi-collinearity The hypothesis that the estimated coefficients were stable and standard errors were not inflated is supported by variance inflation factors, which were mostly within the standard band of tolerance (i.e. greater than 0.1), suggesting that the estimation results are robust to multicollinearity.
Annex 4 Table 40: Results of test of multi-collinearity of main issuing cost model Variable 1/VIF Use of state guarantee (GUARANTEEi) 0.55 Bond rating (RATINGi) 0.56 Time to maturity at issue (MATURITYit) 0.87 Sovereign CDS (SOVi) 0.73 Issuance volume (LIQUIDi) 0.44 Private placement (PRIVATEi) 0.82 Volatility (VOLit) 0.10 USD-denominated (CURRENCY-USDi) 0.69 Non-EUR- and non-USD-denominated (CURRENCY-OTHERi) 0.70 Variable interest rate (COUPON-VARIABLEi) 0.45 Additional controls (not displayed) Month of issue dummies (Ti) Y Country of risk (COUNTRYi) N Number of observations 683 A4.3 Homoscedasticity of residuals The variance of the residuals of the main empirical specification was not clearly found to be homoscedastic through a graph of residuals versus fitted (predicted) values. However, reestimation of the main empirical specification using quantile regression using heteroscedastic robust standard errors (presented in Section 3.5.4) revealed that the main result holds despite the above. 157
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Economic Papers are written by the
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Wherever possible London Economics
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Contents Page Annex 4 Results of di
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Tables, Figures & boxes Page Table
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Glossary vi Glossary BGN Bloomberg
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Executive summary Member States (Cy
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1 Introduction 1 Introduction 1.1
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1 Introduction 1.4 Research questi
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1 Introduction analysis of the lat
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2 Overview of state guarantee sche
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3 Issuing costs of state guarantee
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4 Impact of state guaranteed bonds
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Page 116 and 117: 5 Key empirical findings and polic
Page 118 and 119: References Acharya V.V. and Sundara
Page 120 and 121: Lando, D. (1997). 'Modeling Bonds a
Page 122 and 123: Annex 1 Eligibility criteria for st
Page 140 and 141: Annex 2 Comparison of SG and non-SG
Page 142 and 143: Annex 2 Comparison of SG and non-SG
Page 144 and 145: Annex 3 Analysis of missing issuin
Page 156 and 157: Annex 3 Analysis of missing issuing
Page 158 and 159: Annex 3 Analysis of missing issuing
Page 162 and 163: Annex 4 of issuing cost model Figur
Page 164 and 165: Annex 5 -over model Annex 5 Results
Page 166 and 167: Annex 5 -over model Figure 25: Anal
Page 168 and 169: Annex 6 Availability of bank data A
Page 170 and 171: Annex 6 Availability of bank data T
Page 176 and 177: Annex 7 Linking Bloomberg and Banks
Page 178 and 179: Annex 8 Investigation of estimation
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