An Empirical Analysis of the Lead Lag Relationship Between CDS and Stock Market
This paper complements the recent literature providing a thorough research of the lead lag relationship between stock and sovereign CDS markets using a rolling VAR framework. We find that the transmission channel between the credit and stock market exist. This phenomenon is time varying, it seems to be related with the economic cycle and in general, it’s more intense in US than in Europe.
Authors express their gratitude to Fundación Ramón Areces. A. González-Urteaga acknowledges support from ECO2015-67035-P and ECO2016-77631-R. We thank A. Pardo, O.Carchano, J.A. Álvarez and participants at the 15th INFINITI Conference and Mathematical and Statistical Methods for Actuarial Sciences and Finance (MAF 2018) for comments.
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