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Annals of Operations Research

, Volume 266, Issue 1–2, pp 395–440 | Cite as

Are financial ratios relevant for trading credit risk? Evidence from the CDS market

  • George Chalamandaris
  • Nikos E. Vlachogiannakis
Analytical Models for Financial Modeling and Risk Management
  • 303 Downloads

Abstract

We propose a combination of LASSO with panel-consistent estimation methods to investigate whether financial ratios are used in the decision-making process of CDS traders. Our results indicate that financial statement information does play a role in all the trading horizons surrounding the announcement date and the corresponding styles. These include pro-active analysts trying to predict quarterly results, news traders reacting to unanticipated information and value traders who fine-tune their estimates and act accordingly at a later stage. Our findings also suggest that CDS traders respond asymmetrically to financial ratio updates of different sign and intensity.

Keywords

CDS Financial ratios LASSO Event study Asymmetrical impact Quantile regression 

JEL Classification

C21 G14 G15 G33 

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Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  • George Chalamandaris
    • 1
  • Nikos E. Vlachogiannakis
    • 2
  1. 1.Department of Accounting and FinanceAthens University of Economics and BusinessAthensGreece
  2. 2.Market and Liquidity Risk Analysis SectionBank of GreeceAthensGreece

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