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S&P 500 Index revisions and credit spreads

Author

Listed:
  • Lindsay Baran
  • Ying Li
  • Chang Liu
  • Zilong Liu
  • Xiaoling Pu

Abstract

We investigate the impact of S&P 500 Index revisions on credit spreads from 2001 to 2014. Additions have a significant negative impact on credit default swap (CDS) spreads both during the financial crisis period and for speculative grade firms, but deletions show no significant CDS spread changes. After excluding the effect of market integration between the stock and CDS markets, we find that S&P 500 Index inclusion conveys no unique information beyond that due to market integration except during the financial crisis. Furthermore, CDS trading liquidity does not improve after S&P 500 Index inclusion.

Suggested Citation

  • Lindsay Baran & Ying Li & Chang Liu & Zilong Liu & Xiaoling Pu, 2018. "S&P 500 Index revisions and credit spreads," Review of Financial Economics, John Wiley & Sons, vol. 36(4), pages 348-363, October.
    • Handle: RePEc:wly:revfec:v:36:y:2018:i:4:p:348-363
    DOI: 10.1016/j.rfe.2017.12.001
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