The Credit Default Swap Market's Reaction to Earnings Announcements

Caitlin Ann Greatrex
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Caitlin Ann Greatrex: Fordham University, Department of Economics

Fordham Economics Discussion Paper Series from Fordham University, Department of Economics

Abstract: This paper examines the efficiency of the CDS market by conducting a comparative event study in which both the CDS and the stock markets' responses to earnings announcements are considered. I find that both markets have statistically significant reactions to earnings announcements and both markets anticipate these informational events up to 90 trading days prior to announcement. I further find that neither markets' reaction to earnings announcements is entirely efficient as there is evidence of both over- and under-reaction to earnings news. However, results are sensitive to both the categorization of earnings and the model used to generate abnormal performance.

Keywords: Credit default swap; market efficiency; earnings announcements; credit ratings. (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-fmk and nep-mst
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:frd:wpaper:dp2008-06

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