Is There a Connection between Sovereign CDS Spreads and the Stock Market? Evidence for European and US Returns and Volatilities
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Is There a Connection between Sovereign CDS Spreads and the Stock Market? Evidence for European and US Returns and Volatilities

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Is There a Connection between Sovereign CDS Spreads and the Stock Market? Evidence for European and US Returns and Volatilities

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dc.contributor.author Ballester Miquel, Laura
dc.contributor.author González Urteaga, Ana
dc.date.accessioned 2021-01-18T15:35:17Z
dc.date.available 2021-01-18T15:35:17Z
dc.date.issued 2020
dc.identifier.uri https://hdl.handle.net/10550/77306
dc.description.abstract This study complements the current literature, providing a thorough investigation of the lead-lag connection between stock indices and sovereign credit default swap (CDS) returns for 14 European countries and the US over the period 2004-2016. We use a rolling VAR framework that enables us to analyse the connection process over time covering both crisis and non-crisis periods. In addition, we analyse the relationship between stock market volatility and CDS returns. We find that the connection between the credit and equity markets does exist and that it is time variable and seems to be related to financial crises. We also observe that stock market returns anticipate sovereign CDS returns, and sovereign CDSs anticipate the conditional volatility of equity returns, closing a connectedness circle between markets. Contribution percentages in terms of returns are more intense in the US than in Europe and the opposite result is found with respect to volatilities. Within Europe, a greater impact in Eurozone countries compared to non-Eurozone countries is observed. Finally, an additional analysis is also carried out for the financial sector, obtaining results largely consistent with those found using sovereign data.
dc.relation.ispartof Mathematics, 2020, vol. 8, num. 1667
dc.rights.uri info:eu-repo/semantics/openAccess
dc.source Ballester Miquel, Laura González Urteaga, Ana 2020 Is There a Connection between Sovereign CDS Spreads and the Stock Market? Evidence for European and US Returns and Volatilities Mathematics 8 1667
dc.subject Borsa de valors
dc.subject Crèdit
dc.title Is There a Connection between Sovereign CDS Spreads and the Stock Market? Evidence for European and US Returns and Volatilities
dc.type info:eu-repo/semantics/article
dc.date.updated 2021-01-18T15:35:17Z
dc.identifier.doi https://doi.org/10.3390/math8101667
dc.identifier.idgrec 142575

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