The externalities of credit default swaps on stock return synchronicity
Ran Zhao and
Journal of Futures Markets, 2020, vol. 40, issue 1, 92-125
We examine the externality effect of customer firms’ credit default swap (CDS) trading on the stock price informativeness of supplier firms. Our empirical results show that firms with a high proportion of sales to CDS referenced customers tend to have more firm‐specific embedded information in their stock prices and thus higher stock price informativeness, which is associated with a lower level of stock return synchronicity. We provide new evidence of CDS trading externality on equity market information environments along the supply chain.
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jfutmk:v:40:y:2020:i:1:p:92-125
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