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Banking Sector Performance and Credit Spread

Posted: 29 Jul 2014  

Vichet Sum

University of Maryland Eastern Shore - School of Business and Technology

Date Written: July 27, 2014

Abstract

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

Sum, Vichet, Banking Sector Performance and Credit Spread (July 27, 2014). Available at SSRN: https://ssrn.com/abstract=2472721

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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