Inter-Temporal Stability of the European Credit Spread Co-Movement Structure

University of Antwerp Working Paper

19 Pages Posted: 2 Jan 2004

See all articles by Marc J. K. de Ceuster

Marc J. K. de Ceuster

University of Antwerp - Faculty of Applied Economics - City Campus

Jan Annaert

University of Antwerp Department of Accounting & Finance; University of Antwerp - Antwerp Management School

Anouk G. P. Claes

Université Saint-Louis Brussels; University of Antwerp, Faculty of Applied Economics - City Campus

Date Written: September 2003

Abstract

Corporate bonds expose the investor to credit risk, which will be reflected in the credit spread. Based on the EMU Broad Market indices, we study the inter-temporal stability of the covariance and correlation matrices of credit spread changes on weekly data. For a multivariate framework, the Box and Jennrich tests are the most commonly used test statistics in the literature. However, we show that for small samples these tests are not well specified when the normality assumption is relaxed. A bootstrap-based statistical inference provides evidence that correlations and covariances between various (investment grade) credit spread changes are unstable over the 1998-2003 period.

Keywords: credit spreads, diversification, correlations, corporate bonds

JEL Classification: G110, G150

Suggested Citation

de Ceuster, Marc J. K. and Annaert, Jan and Claes, Anouk G. P., Inter-Temporal Stability of the European Credit Spread Co-Movement Structure (September 2003). University of Antwerp Working Paper. Available at SSRN: https://ssrn.com/abstract=460642 or http://dx.doi.org/10.2139/ssrn.460642

Marc J. K. De Ceuster (Contact Author)

University of Antwerp - Faculty of Applied Economics - City Campus ( email )

Office B-337
Prinsstraat 13
Antwerp, Antwerp 2000
Belgium
+ 32 3 220 41 24 (Phone)
+ 32 3 220 40 64 (Fax)

HOME PAGE: http://www.ua.ac.be/marc.deceuster

Jan Annaert

University of Antwerp Department of Accounting & Finance ( email )

Faculty of Applied Economics
Prinsstraat 13
Antwerp, B-2000
Belgium

HOME PAGE: http://https://www.uantwerp.be/en/staff/jan-annaert/

University of Antwerp - Antwerp Management School ( email )

Boogkeers 5
Antwerp, 2000
Belgium

Anouk G. P. Claes

Université Saint-Louis Brussels ( email )

43 Boulevard du Jardin botanique
Brussels, 1000
Belgium
+32 / (0)2 792 35 15 (Phone)

HOME PAGE: http://www.usaintlouis.be/

University of Antwerp, Faculty of Applied Economics - City Campus ( email )

Prinsstraat 13
Antwerp, 2000
Belgium
+32 220 40 64 (Fax)

HOME PAGE: http://www.ua.ac.be/anouk.claes

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