Sovereign CDS Premiums' Reaction to Macroeconomic News: An Empirical Investigation. (30th July 2021)

• Record Type: Journal Article
• Authors: Lu, Min; Passariello, Michele; Wang, Xing
• Other Names: Xie Lei Academic Editor.
• Is Part Of: Complexity. Volume 2021(2021)
• Publication Date: 2021-07-30
• Subjects: Chaotic behavior in systems -- Periodicals; Complexity (Philosophy) -- Periodicals; 003
• DOI: 10.1155/2021/5568698
• Languages: English
• ISSNs: 1076-2787

Abstract

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.