Asymmetric information in the equity market and information flow from the equity market to the CDS market*

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We investigate whether asymmetric information in the equity market affects the infor-mation flow from the equity market to the credit default swap (CDS) market. We find that the response to stock price changes is larger if they are more informative. Moreover, firms with a lower CDS bid-ask spread are associated with a more rapid response. Our results suggest that asymmetric information in the equity market mainly impacts cross-sectional differences in the total response of the CDS market. Our evidence indicates that this effect is amplified when sentiment-driven trading declines in the equity market or transaction costs are low in the CDS market. (c) 2020 Elsevier B.V. All rights reserved.
Publisher
ELSEVIER
Issue Date
2021-09
Language
English
Article Type
Article
Citation

JOURNAL OF FINANCIAL MARKETS, v.55

ISSN
1386-4181
DOI
10.1016/j.finmar.2020.100607
URI
http://hdl.handle.net/10203/287759
Appears in Collection
MT-Journal Papers(저널논문)
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