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S&P 500 Index revisions and credit spreads
Author(s) -
Baran Lindsay,
Li Ying,
Liu Chang,
Liu Zilong,
Pu Xiaoling
Publication year - 2018
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/j.rfe.2017.12.001
Subject(s) - credit default swap , index (typography) , itraxx , market liquidity , credit default swap index , financial crisis , monetary economics , stock market index , economics , financial system , credit crunch , business , financial economics , stock market , credit valuation adjustment , credit risk , actuarial science , credit reference , macroeconomics , paleontology , horse , biology , world wide web , computer science
We investigate the impact of S&P 500 Index revisions on credit spreads from 2001 to 2014. Additions have a significant negative impact on credit default swap ( CDS ) spreads both during the financial crisis period and for speculative grade firms, but deletions show no significant CDS spread changes. After excluding the effect of market integration between the stock and CDS markets, we find that S&P 500 Index inclusion conveys no unique information beyond that due to market integration except during the financial crisis. Furthermore, CDS trading liquidity does not improve after S&P 500 Index inclusion.