 Global and local information efficiency: An examination of samuelson's dictumYaqing Xiao, Hongjun Yan and Jinfan Zhang Journal of Empirical Finance, 2024, vol. 77, issue C Abstract: The global version of Samuelson's Dictum is the conjecture that there is more informational inefficiency for global information than for country-specific information. Consistent with this conjecture, we find that sovereign CDS spreads can predict future sovereign bond yields of their underlying countries and this predictive power arises almost entirely from CDS spread's global—rather than country-specific—component. Noting the striking similarities between the evidence in stock and sovereign bond markets, we examine the underlying mechanism for the results in both markets in parallel and find further similarities across these two markets. In both cases, information appears to flow in one direction: from the sovereign CDS market to stock and sovereign bond markets and not the other way around. Information transmission occurs mostly during the days surrounding announcements of credit-rating or outlook changes, especially downgrades. These results are broadly consistent with a setup in which information acquisition and processing is costly. Keywords: Samuelson's Dictum; Sovereign bond; Sovereign CDS; Macro inefficiency (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:empfin:v:77:y:2024:i:c:s0927539824000355 DOI: 10.1016/j.jempfin.2024.101500 Access Statistics for this article Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff More articles in Journal of Empirical Finance from Elsevier |
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