Equity Trading Activity and Credit Spread Shock

Journal of Trading, 9(2), 21-26. March, 2014.

12 Pages Posted: 28 Sep 2013 Last revised: 17 Apr 2014

Vichet Sum

University of Maryland Eastern Shore - School of Business and Technology

Date Written: September 26, 2013

Abstract

This study investigates how equity trading activity dynamically responds to credit spread shock. Based on the analysis of monthly data from 1925M1 to 2013M7, equity trading activity, using share volume turnover as a proxy, significantly drops following the shock to credit spread. The results from the Granger-causality test show that credit spread Granger-causes equity trading activity to drop. The variance decomposition results indicate that credit spread forecasts about 1.77%, 2.25% and 4.22% of equity trading activity at the 3-month, 6-month and 12-month horizons, respectively.

Keywords: share turnover, trading activity, credit spread

JEL Classification: G12, G14

Suggested Citation

Sum, Vichet, Equity Trading Activity and Credit Spread Shock (September 26, 2013). Journal of Trading, 9(2), 21-26. March, 2014.. Available at SSRN: https://ssrn.com/abstract=2331698 or http://dx.doi.org/10.2139/ssrn.2331698

Vichet Sum (Contact Author)

University of Maryland Eastern Shore - School of Business and Technology ( email )

2105 Kiah Hall
Princess Anne, MD 21853
United States
410-651-6531 (Phone)
410-651-6529 (Fax)

HOME PAGE: http://www.umes.edu/bma/Sum.html

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