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Predictability dynamics of emerging sovereign CDS markets

Ahmet Sensoy, Frank J. Fabozzi and Veysel Eraslan

Economics Letters, 2017, vol. 161, issue C, 5-9

Abstract: We compare the time-varying weak-form efficiency of Credit Default Swap (CDS) markets of 15 emerging countries by using permutation entropy approach. We find that CDS markets have different degrees of time-varying efficiency. Using several robustness test, we find that Thailand, China, South Korea and Malaysia have the most efficient CDS markets while South Africa, Colombia and Turkey are the least efficient. Our results show that CDS markets can be efficient even in the crisis episodes. Our findings also suggest a strong negative relation between sovereign risk and CDS market efficiency.

Keywords: Efficient market hypothesis (EMH); CDS; Permutation entropy (search for similar items in EconPapers)
JEL-codes: C53 C65 G14 G15 (search for similar items in EconPapers)
Date: 2017
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