Sovereign CDS Premiums’ Reaction to Macroeconomic News: An Empirical Investigation

Lu, M.; Passariello, M.; Wang, X.

Abstract

We assess the efficiency of the sovereign credit default swap (CDS) market by investigating how sovereign CDS spreads react to macroeconomic news announcements. Contrary to the vast majority of the existing literature, one of our main findings supports the hypothesis that news announcements reduce market uncertainty and, thus, that both better- and worse-than-expected news lower CDS prices during our sample period. In addition, we find that CDS spreads respond differently to the four macroindicators across the three different regions. Our findings might help investors in these areas to interpret the surprises of macronews announcements when making decisions in CDS markets.

Citation

Lu, M., Passariello, M., & Wang, X. (2021). Sovereign CDS Premiums’ Reaction to Macroeconomic News: An Empirical Investigation. Complexity, 2021, Article 5568698. https://doi.org/10.1155/2021/5568698

• Journal Article Type: Article
• Acceptance Date: Jul 14, 2021
• Online Publication Date: Jul 30, 2021
• Publication Date: Sep 1, 2021
• Deposit Date: Sep 9, 2021
• Publicly Available Date: Sep 10, 2021
• Journal: Complexity
• Print ISSN: 1076-2787
• Electronic ISSN: 1099-0526
• Publisher: Hindawi
• Peer Reviewed: Peer Reviewed
• Volume: 2021
• Article Number: 5568698
• DOI: https://doi.org/10.1155/2021/5568698
• Public URL: https://durham-repository.worktribe.com/output/1235146