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Credit spreads: An empirical analysis on the informational content of stocks, bonds, and CDS

  • Forte, Santiago
  • Peña, Juan Ignacio
Registered author(s):

    This paper explores the dynamic relationship between stock market implied credit spreads, CDS spreads, and bond spreads. A general VECM representation is proposed for changes in the three credit spread measures which accounts for zero, one, or two independent cointegration equations, depending on the evidence provided by any particular company. Empirical analysis on price discovery, based on a proprietary sample of North American and European firms, and tailored to the specific VECM at hand, indicates that stocks lead CDS and bonds more frequently than the other way round. It likewise confirms the leading role of CDS with respect to bonds.

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    File URL: http://www.sciencedirect.com/science/article/B6VCY-4W4TXYN-3/2/b7b4ad814deefabd8c5810103dec559a
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    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 33 (2009)
    Issue (Month): 11 (November)
    Pages: 2013-2025

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    Handle: RePEc:eee:jbfina:v:33:y:2009:i:11:p:2013-2025
    Contact details of provider: Web page: http://www.elsevier.com/locate/jbf

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