Information in CDS Spreads

47 Pages Posted: 2 Jun 2008 Last revised: 26 Mar 2014

See all articles by Lars Norden

Lars Norden

Getulio Vargas Foundation (FGV) - Brazilian School of Public and Business Administration (EBAPE)

Date Written: March 12, 2014

Abstract

We investigate how public and private information drives corporate CDS spreads before rating announcements. We find that CDS spreads of firms with higher news intensity move significantly earlier and stronger before rating announcements, which can be explained with public information from daily wire news. We also find that private information of banks matters. CDS spread changes are larger for firms with more banks and days with no news but large abnormal CDS spread changes are more frequent before negative announcements than before positive ones. The evidence highlights the important role of CDS in processing public and private credit information.

Keywords: Informational efficiency, Credit default swaps, Corporate news, Insider trading, Bank relationships

JEL Classification: D80, G10, G14, G20

Suggested Citation

Norden, Lars, Information in CDS Spreads (March 12, 2014). Available at SSRN: https://ssrn.com/abstract=1138698 or http://dx.doi.org/10.2139/ssrn.1138698

Lars Norden (Contact Author)

Getulio Vargas Foundation (FGV) - Brazilian School of Public and Business Administration (EBAPE) ( email )

Rua Jornalista Orlando Dantas 30
Rio de Janeiro, 22231-010
Brazil
+552130832431 (Phone)

HOME PAGE: http://www.larsnorden.de

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