What Economic Factors Underlie Connectedness in Corporate Credit Default Swaps: News vs. Macroeconomic Factors?

Andrew Castro and Neville Francis
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Neville Francis: UNC Chapel Hill

No 586, 2018 Meeting Papers from Society for Economic Dynamics

Abstract: We examine the economic factors that underlie return and price volatility networks for corporate credit default swaps. After examining company-level networks we aggregate the data to study sector-level net connectedness. By introducing company news measures and macroeconomic covariates, we explore their effects on net connectedness. We find that no one factor explains connectedness across all sectors. Additionally, while returns networks are mainly influenced by news releases and macroeconomic factors are the main impetus behind price volatility networks, neither explain the general changes to net connectedness over time.

Date: 2018
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