An analysis of sectoral equity and CDS spreads

Paresh Narayan ()

Journal of International Financial Markets, Institutions and Money, 2015, vol. 34, issue C, 80-93

Abstract: In this paper, we find that CDS return shocks are important in explaining the forecast error variance of sectoral equity returns for the USA. The CDS return shocks have different effects on equity returns and return volatility in the pre-crisis and crisis periods. It is the post-Lehman crisis period in which the effects of CDS return shocks are the most dominant. Finally, we construct a spillover index and find that it is time-varying and explains a larger share of total forecast error variance of sectoral equity and CDS returns for some sectors than for others.

Keywords: Equity returns; CDS spread; Forecast error variance; Spillover (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (24)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:34:y:2015:i:c:p:80-93

DOI: 10.1016/j.intfin.2014.10.004

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