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An analysis of sectoral equity and CDS spreads

Narayan, Paresh Kumar 2015, An analysis of sectoral equity and CDS spreads, Journal of international financial markets, institutions and money, vol. 34, pp. 80-93, doi: 10.1016/j.intfin.2014.10.004.

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Title An analysis of sectoral equity and CDS spreads
Author(s) Narayan, Paresh Kumar
Journal name Journal of international financial markets, institutions and money
Volume number 34
Start page 80
End page 93
Total pages 14
Publisher Elsevier
Place of publication Amsterdam, The Netherlands
Publication date 2015-01
ISSN 1042-4431
Keyword(s) CDS spread
Equity returns
Forecast error variance
Spillover
Social Sciences
Business, Finance
Economics
Business & Economics
CREDIT DEFAULT SWAP
IMPULSE-RESPONSE ANALYSIS
VOLATILITY SPILLOVERS
MULTIVARIATE MODELS
EMPIRICAL-ANALYSIS
PRICE DISCOVERY
MARKETS
RISK
DERIVATIVES
RETURNS
Summary In this paper, we find that CDS return shocks are important in explaining the forecast error variance of sectoral equity returns for the USA. The CDS return shocks have different effects on equity returns and return volatility in the pre-crisis and crisis periods. It is the post-Lehman crisis period in which the effects of CDS return shocks are the most dominant. Finally, we construct a spillover index and find that it is time-varying and explains a larger share of total forecast error variance of sectoral equity and CDS returns for some sectors than for others.
Language eng
DOI 10.1016/j.intfin.2014.10.004
Field of Research 150202 Financial Econometrics
Socio Economic Objective 919999 Economic Framework not elsewhere classified
HERDC Research category C1 Refereed article in a scholarly journal
ERA Research output type C Journal article
Copyright notice ©2014, Elsevier
Persistent URL http://hdl.handle.net/10536/DRO/DU:30070383

Document type: Journal Article
Collection: Department of Economics
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