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

Min Lu | Zendy; Michele Passariello | Zendy; Xing Wang | Zendy

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

Author(s) -

Min Lu,

Michele Passariello,

Xing Wang

Publication year - 2021

Publication title -

complexity

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.447

H-Index - 61

eISSN - 1099-0526

pISSN - 1076-2787

DOI - 10.1155/2021/5568698

Subject(s) - credit default swap , monetary economics , sovereignty , sovereign credit , swap (finance) , sample (material) , business , economics , financial economics , credit risk , actuarial science , finance , chemistry , chromatography , politics , political science , law

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.

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