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Financial news and CDS spreads

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  • Narayan, Paresh Kumar
  • Bannigidadmath, Deepa

Abstract

This paper examines whether financial news moves CDS spreads for a large number of U.S. stocks sorted into 19 panels consisting of sectors, sizes and credit quality. Using a unique financial news data set, we discover that while both positive and negative news predicts CDS spread changes in most of the panels, annualised mean–variance profits and utility gains are dominated by forecasting models that use positive news as a predictor. At best, risk factors only account for around 31% of observed profits.

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  • Narayan, Paresh Kumar & Bannigidadmath, Deepa, 2021. "Financial news and CDS spreads," Journal of Behavioral and Experimental Finance, Elsevier, vol. 29(C).
    • Handle: RePEc:eee:beexfi:v:29:y:2021:i:c:s2214635020303774
    DOI: 10.1016/j.jbef.2020.100448
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    Cited by:

    1. Golab, Anna & Bannigidadmath, Deepa & Pham, Thach Ngoc & Thuraisamy, Kannan, 2022. "Economic policy uncertainty and industry return predictability – Evidence from the UK," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 433-447.
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    3. Narayan, Paresh Kumar & Bannigidadmath, Deepa & Narayan, Seema, 2021. "How much does economic news influence bilateral exchange rates?," Journal of International Money and Finance, Elsevier, vol. 115(C).

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