The Credit Default Swap Market's Reaction to Earnings Announcements
AbstractThis paper examines the efficiency of the CDS market by conducting a comparative event study in which both the CDS and the stock markets' responses to earnings announcements are considered. I find that both markets have statistically significant reactions to earnings announcements and both markets anticipate these informational events up to 90 trading days prior to announcement. I further find that neither markets' reaction to earnings announcements is entirely efficient as there is evidence of both over- and under-reaction to earnings news. However, results are sensitive to both the categorization of earnings and the model used to generate abnormal performance.
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Bibliographic InfoPaper provided by Fordham University, Department of Economics in its series Fordham Economics Discussion Paper Series with number dp2008-06.
Date of creation: 2008
Date of revision:
Credit default swap; market efficiency; earnings announcements; credit ratings.;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-03-08 (All new papers)
- NEP-FMK-2008-03-08 (Financial Markets)
- NEP-MST-2008-03-08 (Market Microstructure)
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