Dynamics and determinants of credit risk discovery: Evidence from CDS and stock markets
| Autor: | Chulwoo Han, Frankie Chau, Shimeng Shi |
|---|---|
| Rok vydání: | 2018 |
| Předmět: |
040101 forestry
Economics and Econometrics 050208 finance Cointegration 05 social sciences Improved method 04 agricultural and veterinary sciences Monetary economics Lien 0502 economics and business Clearing 0401 agriculture forestry and fisheries Counterparty Insider trading Business Finance Stock (geology) Credit risk |
| Zdroj: | International review of financial analysis, 2018, Vol.55, pp.156-169 [Peer Reviewed Journal] |
| ISSN: | 1057-5219 |
| DOI: | 10.1016/j.irfa.2017.11.004 |
| Popis: | This paper investigates the dynamics and drivers of credit risk discovery between stock and CDS markets in the US. Our research is distinguished from the existing literature in three aspects: 1) we employ an improved method to measure the information share; 2) we discover new drivers of credit risk discovery; and 3) we assess the impact of central clearing counterparty (CCP) on the CDS market. By using the generalized information share (GIS) by Lien and Shrestha (2014), we address the issue that the CDS and stock prices do not have one-to-one cointegration relation. The empirical results support the use of GIS instead of more conventional measures. We also find that eliminating transitory price components increases the information share of the CDS market in the earlier period of the sample. The economic condition and funding cost turn out to affect the information share of the CDS market negatively. Another interesting finding is that the CDS of investment grade firms possess higher information shares compared to speculative grade firms. Finally, CCP seems to reduce the information share of CDS, which suggests that the CDS market is driven largely by insider trading. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
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