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Intertemporal stability of the European credit spread co-movement structure1

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  • Jan Annaert
  • Anouk Claes
  • Marc De Ceuster

Abstract

Corporate bonds expose the investor to credit risk, which will be reflected in the credit spread. Based on the EMU Broad Market indices, this paper reports studies of the intertemporal 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, it is shown 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.

Suggested Citation

  • Jan Annaert & Anouk Claes & Marc De Ceuster, 2006. "Intertemporal stability of the European credit spread co-movement structure1," The European Journal of Finance, Taylor & Francis Journals, vol. 12(1), pages 23-32.
    • Handle: RePEc:taf:eurjfi:v:12:y:2006:i:1:p:23-32
    DOI: 10.1080/1351847042000304116
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    References listed on IDEAS

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    Cited by:

    1. Brière, Marie & Chapelle, Ariane & Szafarz, Ariane, 2012. "No contagion, only globalization and flight to quality," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1729-1744.
    2. repec:dau:papers:123456789/7746 is not listed on IDEAS
    3. Mehdi Mili, 2018. "Systemic risk spillovers in sovereign credit default swaps in Europe: a spatial approach," Journal of Asset Management, Palgrave Macmillan, vol. 19(2), pages 133-143, March.

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