Did the EU Summits Succeed in Convincing the Markets during the Recent Crisis?

Abstract

Using an event study approach, this article examines whether crisis meetings of European heads of state and government, as well as their agreed and communicated results, had a significant impact on Europe's financial markets. The analysis is based on daily data for seven Member States of the eurozone (France, Germany, Greece, Ireland, Italy, Portugal and Spain), starting in autumn 2008 and covering the time period until April 2012. To summarize the findings, the high-profile meetings appear to have only minor effects that ceased quickly. Therefore, it can be concluded that investors consider Europe's economic and political crisis management insufficient and its communication strategy little convincing. While controlling for additional effects, it was found that European Central Bank policy measures may have had short-run effects on bond returns and the exchange rate, but no intended influence on stock prices, except for Italy. © 2013 John Wiley & Sons Ltd.