Journal of East Asian studies

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Journal of East Asian studies Volume 17
published_at 2019-03

Lead-lag relationship between the CDS and the stock market and informed trading : Evidence from the Japanese CDS market

Lead-lag relationship between the CDS and the stock market and informed trading : Evidence from the Japanese CDS market
Park Jinwoo
Sun Naili
fulltext
1.63 MB
D300017000003.pdf
Descriptions
This paper investigates the dynamic relationship between CDS and stock market whether informed trading occurs in Japanese market. We find that the lead-lag relationship between CDS and stock market is not stable and that CDS market’s contribution to the price discovery process is much higher in times of crisis. In addition, the unconditional information flow from CDS to stock market exists, but primarily for keiretsu-affiliated firms. Furthermore, the flow of information from CDS market to stock market, which is conditional on there being a bad credit event ahead, exists only in times of crisis and only for keiretsu-affiliated firms
Creator Keywords
Credit risk
CDS (credit default swap)
Lead-lag relationship
Information flow
Informed trading