Paserman Presents at Edinburgh Conference

Dr. Michal Paserman, finance research faculty, presented her research at a conference on Legal Institutions and Finance.

Guided by the importance of legal institutions for financial development and economic activity, the University of Edinburgh brought together leading academics with the objective of developing new models and tools to enhance the understanding of the role of legal institutions in shaping financial development and ultimately yield valuable insights for policy makers and institutional reforms.

Dr. Paserman presented her work on “Comovement or Safe Haven? The Effect of Corruption on the Market Risk of Sovereign Bonds of Emerging Economies during Financial Crises”. Paserman’s work shows that the sensitivity of sovereign bonds issued by countries perceived as more corrupt to systematic shocks, increases during financial crises. The prices of bonds issued by less corrupt countries are determined more idiosyncratically when investor sentiment deteriorates, and realize more hedging benefits against the S&P 500 risk.

Paserman’s findings have important implications for global financial stability and suggest that by reducing corruption, emerging markets could benefit from global integration while decreasing potential side effects of sudden capital outflows during crises.