Are Credit Default Swaps a Sideshow? Evidence That Information Flows from Equity to CDS Markets

Journal of Financial and Quantitative Analysis - Tập 50 Số 3 - Trang 543-567 - 2015
Jens Hilscher, Joshua Matthew Pollet, Mungo Ivor Wilson

Tóm tắt

AbstractThis article provides evidence that equity returns lead credit protection returns at daily and weekly frequencies, whereas credit protection returns do not lead equity returns. Our results indicate that informed traders are primarily active in the equity market rather than the credit default swap (CDS) market. These findings are consistent with standard theories of market selection by informed traders in which market selection is determined partially by transaction costs. We also find that credit protection returns respond more quickly during salient news events (earnings announcements) compared to days with similar equity returns and turnover. This evidence provides support for explanations related to investor inattention.

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Thông tin xuất bản

Journal of Financial and Quantitative Analysis

Tập 50 Số 3

543-567

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