Revisiting the Relevance of Financial-Statement for CDS Trading From an Adaptive-Markets Hypothesis Perspective

30 Pages Posted: 16 Oct 2018

See all articles by George Chalamandaris

George Chalamandaris

Athens University of Economics and Business - Department of Accounting and Finance

Date Written: September 24, 2018

Abstract

Using a framework motivated by the Adaptive Markets Hypothesis (AMH) I explore the extent to which the financial statement (FS) is relevant for Credit Default Swap (CDS) trading. I propose a Bayesian Model Averaging approach to examine properties of accounting metrics that enter the trading heuristics of the market participants. Hypothesis-testing is conducted on various horizons around the announcement of corporate results. The diversity of trading rules and the shift in the heuristics mix that occurred after 2008, support the AMH perspective. Overall, results show that there is a significant component of profit-motivated trading in the CDS market that relies on financial statement information.

Keywords: Adaptive Markets Hypothesis, Financial Statement, Bayesian Model Averaging, CDS

JEL Classification: C44, G14, C11

Suggested Citation

Chalamandaris, George, Revisiting the Relevance of Financial-Statement for CDS Trading From an Adaptive-Markets Hypothesis Perspective (September 24, 2018). Available at SSRN: https://ssrn.com/abstract=3254207 or http://dx.doi.org/10.2139/ssrn.3254207

George Chalamandaris (Contact Author)

Athens University of Economics and Business - Department of Accounting and Finance ( email )

76 Patission Street
GR-104 34 Athens
Greece

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