Posted: 29 Jul 2014
Date Written: July 27, 2014
This study investigates the dynamic effect of credit spread on the performance of banking sector. Based on the analysis of monthly data from 1941M2 to 2013M6, the results indicate that return on the S&P 500 Banks Index 4010 significantly drops following credit spread shock. The decline becomes worse for a few months following the shock to credit spread. The Granger causality Wald test also indicates that there is a causal linkage between return on the S&P 500 Banks Index 4010 and credit spread.
Keywords: credit spread, banking sector performance, VAR
JEL Classification: G12, G14, G20
Suggested Citation: Suggested Citation
Sum, Vichet, Banking Sector Performance and Credit Spread (July 27, 2014). Available at SSRN: https://ssrn.com/abstract=2472721