Are financial ratios relevant for trading credit risk? Evidence from the CDS market

George Chalamandaris and Nikos E. Vlachogiannakis ()
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Nikos E. Vlachogiannakis: Bank of Greece

Annals of Operations Research, 2018, vol. 266, issue 1, No 17, 395-440

Abstract: Abstract We propose a combination of LASSO with panel-consistent estimation methods to investigate whether financial ratios are used in the decision-making process of CDS traders. Our results indicate that financial statement information does play a role in all the trading horizons surrounding the announcement date and the corresponding styles. These include pro-active analysts trying to predict quarterly results, news traders reacting to unanticipated information and value traders who fine-tune their estimates and act accordingly at a later stage. Our findings also suggest that CDS traders respond asymmetrically to financial ratio updates of different sign and intensity.

Keywords: CDS; Financial ratios; LASSO; Event study; Asymmetrical impact; Quantile regression (search for similar items in EconPapers)
JEL-codes: C21 G14 G15 G33 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (6)

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DOI: 10.1007/s10479-016-2373-3

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