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Contribution Details
| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | Do CDS Spreads lead Stock Prices? Evidence from Price Reactions to COVID-19 |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Date | 2020 |
| Abstract Text | In this thesis the lead-lag relationship between equity and credit default swap (CDS) markets during the COVID-19 pandemic is investigated. Using a data sample of 214 companies headquartered in developed countries, it can be shown that both markets jointly contribute to price discovery when “bad” news arise. When markets start to recover (“good” news), equity returns significantly predict CDS spread changes mainly because of the presence of hedgers in the CDS markets. This thesis provides further evidence that market-adjusted stock returns predict market-adjusted CDS spread changes when “good” news arise. Additionally, it is shown that CDS spreads react more sensitive on equity returns when the company credit rating is higher. |
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