 Financial CDS, stock market and interest rates: Which drives which?Shawkat Hammoudeh and Ramazan Sarı The North American Journal of Economics and Finance, 2011, vol. 22, issue 3, 257-276 Abstract: The objective is to examine the short- and long-run dynamics of US financial CDS index spreads at the sector level and explore their relationships with the stock market and the short- and long-run government securities, paying particular attention to the subperiod that begins with the 2007 Great Recession. We use daily time series for the three US five-year CDS index spreads for banking, financial services and insurance sectors, the S&P 500 index, the short- and long-term Treasury securities rates. Employing the Autoregressive Distributed Lag approach (ARDL), this study finds more long-run relationships between the five financial variables in Model II that includes the six-month T bill rate than Model I that includes the 10-year T bond rate. The long-run relationships have weakened in both models under the subperiod than the full period. Moreover, the short-run dynamics have changed under the subperiod but the changes are mixed. Implications are relevant for decision-makers who are interested in financial relationships at the sector level than at the firm level. Keywords: Sector CDSs; Risk; Forcing variables; Great recession; Equilibrium adjustments (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:22:y:2011:i:3:p:257-276 DOI: 10.1016/j.najef.2011.04.001 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
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