Abstract

http://ssrn.com/abstract=1585132
 
 

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Financial Crises and Information Transfer - An Empirical Analysis of the Lead-Lag Relationship between Equity and CDS iTraxx Indices


Stefan Ehlers


Technische Universität Braunschweig - Institute of Finance

Marc Gürtler


University of Braunschweig - Institute of Technology, Department of Finance

Sven Olboeter


University of Braunschweig - Institute of Technology , Department of Finance

April 6, 2010


Abstract:     
This study examines the lead-lag-relationship between European equity and CDS markets in the context of the financial crisis. Previous research identified the stock market to lead the CDS market in an ordinary economic environment. Against the background of our study this lead-lag-relationship strengthens when moving from the non-crisis- to the crisis-scenario on a daily as well as on a weekly basis. Hence, we conclude that information transfer from stock to CDS markets widens during the financial crisis. In addition and in contrast to the literature we find an extraordinary day-of-the-week-effect on weekly returns as an anomaly for information processing.

Number of Pages in PDF File: 28

Keywords: Granger-causality, iTraxx Indices, Credit Default Swaps, Day-of-the-Week-Effect, Feedback System

JEL Classification: G14, G15, G17

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Date posted: April 8, 2010  

Suggested Citation

Ehlers, Stefan and Gürtler, Marc and Olboeter, Sven, Financial Crises and Information Transfer - An Empirical Analysis of the Lead-Lag Relationship between Equity and CDS iTraxx Indices (April 6, 2010). Available at SSRN: http://ssrn.com/abstract=1585132 or http://dx.doi.org/10.2139/ssrn.1585132

Contact Information

Stefan Ehlers
Technische Universität Braunschweig - Institute of Finance ( email )
Abt-Jerusalem-Str. 7
Braunschweig, 38106
Germany
Marc Gürtler (Contact Author)
University of Braunschweig - Institute of Technology, Department of Finance ( email )
Abt-Jerusalem-Str. 7
Braunschweig, 38106
Germany
Sven Olboeter
University of Braunschweig - Institute of Technology , Department of Finance ( email )
Abt-Jerusalem-Str. 7
Braunschweig, D-38106
Germany
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