TY - JOUR
T1 - Credit spreads
T2 - An empirical analysis on the informational content of stocks, bonds, and CDS
AU - Forte, Santiago
AU - Peña, Juan Ignacio
N1 - Funding Information:
This paper was partially drafted during the visit of Santiago Forte to the Department of Finance at Tilburg University. We acknowledge financial support from MEC Grants Refs: AP2000-1327, BEC2002-0279, and SEJ2005-05485, and thank Philippe Gagnepain, Hao Wang, Bas Werker, Max Bruche and Carmen Ansotegui for helpful suggestions. We also acknowledge comments from seminar audiences at Universidad Carlos III de Madrid, Banco de España, ESADE Business School, XIII Foro de Finanzas, C.R.E.D.I.T. 2005 Conference, EFMA Conference 2006, and FMA European Conference 2007. We are also grateful to Banco Santander for allowing access to their data on CDS spreads. The usual disclaimers apply.
PY - 2009/11
Y1 - 2009/11
N2 - This paper explores the dynamic relationship between stock market implied credit spreads, CDS spreads, and bond spreads. A general VECM representation is proposed for changes in the three credit spread measures which accounts for zero, one, or two independent cointegration equations, depending on the evidence provided by any particular company. Empirical analysis on price discovery, based on a proprietary sample of North American and European firms, and tailored to the specific VECM at hand, indicates that stocks lead CDS and bonds more frequently than the other way round. It likewise confirms the leading role of CDS with respect to bonds.
AB - This paper explores the dynamic relationship between stock market implied credit spreads, CDS spreads, and bond spreads. A general VECM representation is proposed for changes in the three credit spread measures which accounts for zero, one, or two independent cointegration equations, depending on the evidence provided by any particular company. Empirical analysis on price discovery, based on a proprietary sample of North American and European firms, and tailored to the specific VECM at hand, indicates that stocks lead CDS and bonds more frequently than the other way round. It likewise confirms the leading role of CDS with respect to bonds.
KW - Credit spreads
KW - Price discovery
UR - http://www.scopus.com/inward/record.url?scp=70249121398&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2009.04.015
DO - 10.1016/j.jbankfin.2009.04.015
M3 - Article
AN - SCOPUS:70249121398
SN - 0378-4266
VL - 33
SP - 2013
EP - 2025
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
IS - 11
ER -