Research and publications
Related Securities and Equity Market Quality: The Case of CDS
We document that the emergence of markets for single-name credit default swap (CDS) contracts adversely affects equity market quality. The finding that firms with traded CDS contracts on their debt have less liquid equity and less efficient stock prices is robust across a variety of market quality measures and to controlling for endogeneity. We analyse the potential mechanisms driving this result and find evidence consistent with negative trader-driven information spillovers that result from the introduction of CDS.
Author(s):
Ekkehart Boehmer, Sudheer Chava, Heather E. Tooke
Summary:
We document that the emergence of markets for single-name credit default swap (CDS) contracts adversely affects equity market quality. The finding that firms with traded CDS contracts on their debt have less liquid equity and less efficient stock prices is robust across a variety of market quality measures and to controlling for endogeneity. We analyse the potential mechanisms driving this result and find evidence consistent with negative trader-driven information spillovers that result from the introduction of CDS.
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Register/Log in| Type : | Working paper |
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| Date : | 03/04/2013 |
| Keywords : |
Credit Default Swaps |
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