 Are credit default swaps still a sideshow? How information flow between equity and CDS markets has changed since the financial crisisRuolin Wang, Anup Basu and Adam Clements Global Finance Journal, 2023, vol. 57, issue C Abstract: We examine the information flow between equity and credit default swap (CDS) markets using firm-level returns data before and after the global financial crisis. Before the crisis, the information flow was unidirectional, with equity returns leading CDS returns. While equity returns continue to lead CDS returns after the crisis, we find that the speed of adjustment of the CDS market to equity markets has increased during this period. We also find evidence of a bidirectional flow of information between these markets, with equity returns responding to credit protection returns in the postcrisis period. The quicker response of CDS spreads to equity returns during the postcrisis period primarily occurs among entities with lower credit ratings. In contrast, the response of equity returns to lagged CDS returns during the postcrisis period is observed among firms across different credit rating categories; however, the magnitude of the response is higher among those with lower credit ratings. Keywords: Credit default swaps (CDS); Market efficiency; Price discovery; Global financial crisis (GFC); Dodd–Frank Act; Lead-lag relation (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:glofin:v:57:y:2023:i:c:s1044028323000443 DOI: 10.1016/j.gfj.2023.100849 Access Statistics for this article Global Finance Journal is currently edited by Manuchehr Shahrokhi More articles in Global Finance Journal 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.