 The impact of COVID-19 on the relative market efficiency and forecasting ability of credit derivative and equity marketsWilliam J. Procasky and Anwen Yin International Review of Financial Analysis, 2023, vol. 90, issue C Abstract: While there has been a significant amount of research related to COVID-19’s impact on financial markets, none has addressed the potential change in relative market efficiency and associated forecasting power of credit and equity markets. Accordingly, we examine the impact of COVID-19 on previously observed predictive power of cross-market informational flow in the high yield CDS and equity markets. Our analysis reveals that, a significant structural break occurred with the onset of COVID-19 in which both markets exhibited flow patterns distinct from those observed in the past. This indicates that investors reacted to the pandemic and new information coming to market differently than in the past. Moreover, we empirically link the structural break to governmental measures enacted to stabilize financial markets and economies. Finally, we observe that the break was more severe in the equity than CDS market, a finding consistent with the CDS market having an overall informational advantage. Keywords: COVID-19; Market efficiency; Informational flow; Predictive power; Structural break; CDS indices (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:finana:v:90:y:2023:i:c:s1057521923004428 DOI: 10.1016/j.irfa.2023.102926 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.