TY  - JOUR
AU  - Mayordomo,Sergio
AU  - Peña,Juan Ignacio
AU  - Schwartz,Eduardo S.
TI  - Towards a Common European Monetary Union Risk Free Rate
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15353
PY  - 2009
Y2  - September 2009
UR  - http://www.nber.org/papers/w15353
L1  - http://www.nber.org/papers/w15353.pdf
N1  - Author contact info:
Sergio Mayordomo
Comision Nacional del Mercado 
  de Valores (CNMV)
Miguel Angel, 11
28010 Madrid
Spain
E-Mail: smgomez@cnmv.es

Juan Ignacio Pena
Universidad Carlos III
Madrid 126
28903 Getafe
Madrid, Spain
E-Mail: ypenya@eco.uc3m.es

Eduardo S. Schwartz
Anderson Graduate School of Management
UCLA
110 Westwood Plaza
Los Angeles, CA  90095
Tel: 310/825-2873
Fax: 310/825-6384
E-Mail: eduardo.schwartz@anderson.ucla.edu
AB  - A common European bond would yield a common European Monetary Union risk free rate. We present tentative estimates of this common risk free for the European Monetary Union countries from 2004 to 2009 using variables motivated by a theoretical portfolio selection model. First, we analyze the determinants of EMU sovereign yield spreads and find significant effects of the credit quality, macro, correlation, and liquidity variables. However, their effects are different before and after the current financial crisis, being stronger in the latter period. Robustness tests with different data frequencies, benchmarks, liquidity variables, cross section regressions and balanced panels confirm the initial results. We propose four different estimates of the common risk free rate and show that, in most cases, this common rate could imply savings in borrowing costs for all the countries involved.
ER  -