Credit spreads: An empirical analysis on the informational content of stocks, bonds, and CDS

S. Forte Arcos; Juan Ignacio Peña

doi:10.1016/j.jbankfin.2009.04.015

Credit spreads: An empirical analysis on the informational content of stocks, bonds, and CDS

S. Forte Arcos^*
, Juan Ignacio Peña

^*Autor corresponent d’aquest treball

Producció científica: Article en revista indexada › Article › Avaluat per experts

193 Cites (Scopus)

Resum

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.

Idioma original	Anglès
Pàgines (de-a)	2013-2025
Nombre de pàgines	13
Revista	Journal of Banking and Finance
Volum	33
Número	11
DOIs	https://doi.org/10.1016/j.jbankfin.2009.04.015
Estat de la publicació	Publicada - de nov. 2009
Publicat externament	Sí

Accés al document

10.1016/j.jbankfin.2009.04.015

Altres arxius i enllaços

Link to publication in Scopus

Com citar-ho

@article{e4467b10bc584f46a4b5af0724901451,

title = "Credit spreads: An empirical analysis on the informational content of stocks, bonds, and CDS",

abstract = "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.",

keywords = "Credit spreads, Price discovery",

author = "\{Forte Arcos\}, S. and Pe{\~n}a, \{Juan Ignacio\}",

note = "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 Espa{\~n}a, 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.",

year = "2009",

month = nov,

doi = "10.1016/j.jbankfin.2009.04.015",

language = "English",

volume = "33",

pages = "2013--2025",

journal = "Journal of Banking and Finance",

issn = "0378-4266",

publisher = "Elsevier B.V.",

number = "11",

}

TY - JOUR

T1 - Credit spreads

T2 - An empirical analysis on the informational content of stocks, bonds, and CDS

AU - Forte Arcos, S.

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 - https://www.scopus.com/pages/publications/70249121398

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 -

Credit spreads: An empirical analysis on the informational content of stocks, bonds, and CDS

Resum

Accés al document

Altres arxius i enllaços

Fingerprint

Com citar-ho