S&P 500 Index revisions and credit spreads

Lindsay Baran, Ying Li, Chang Liu, Zilong Liu and Xiaoling Pu

Review of Financial Economics, 2018, vol. 36, issue 4, 348-363

Abstract: We investigate the impact of S&P 500 Index revisions on credit spreads from 2001 to 2014. Additions have a significant negative impact on credit default swap (CDS) spreads both during the financial crisis period and for speculative grade firms, but deletions show no significant CDS spread changes. After excluding the effect of market integration between the stock and CDS markets, we find that S&P 500 Index inclusion conveys no unique information beyond that due to market integration except during the financial crisis. Furthermore, CDS trading liquidity does not improve after S&P 500 Index inclusion.

Date: 2018
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https://doi.org/10.1016/j.rfe.2017.12.001

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Persistent link: https://EconPapers.repec.org/RePEc:wly:revfec:v:36:y:2018:i:4:p:348-363

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