Abstract

http://ssrn.com/abstract=1718653
 
 

References (26)



 
 

Citations (3)



 
 

Footnotes (14)



 


 



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


Jens Hilscher


Brandeis University - International Business School

Joshua Matthew Pollet


University of Illinois at Urbana-Champaign - Department of Finance

Mungo Ivor Wilson


University of Oxford - Said Business School

May 28, 2013


Abstract:     
This paper provides evidence that equity returns lead credit protection returns at daily and weekly frequencies, while credit protection returns do not lead equity returns. Our results indicate that informed traders are primarily active in the equity rather than the 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.

Number of Pages in PDF File: 37

Keywords: CDS, market segmentation, inattention

JEL Classification: G12

working papers series


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Date posted: December 3, 2010 ; Last revised: June 1, 2013

Suggested Citation

Hilscher, Jens and Pollet, Joshua Matthew and Wilson, Mungo Ivor, Are Credit Default Swaps a Sideshow? Evidence that Information Flows from Equity to CDS Markets (May 28, 2013). Available at SSRN: http://ssrn.com/abstract=1718653 or http://dx.doi.org/10.2139/ssrn.1718653

Contact Information

Jens Hilscher (Contact Author)
Brandeis University - International Business School ( email )
Mailstop 32
Waltham, MA 02454-9110
United States
HOME PAGE: http://people.brandeis.edu/~hilscher/
Joshua Matthew Pollet
University of Illinois at Urbana-Champaign - Department of Finance ( email )
1206 South Sixth Street
Champaign, IL 61820
United States
(217) 344-4311 (Phone)
Mungo Ivor Wilson
University of Oxford - Said Business School ( email )
Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0) 1865 288914 (Phone)
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References:  26
Citations:  3
Footnotes:  14

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