Surprises,sentiments, and the expectations hypothesis of the term structure of interest rates |
| |
Authors: | Cathy Yi-Hsuan Chen Thomas C. Chiang |
| |
Affiliation: | 1.Department of Finance, Deakin Business School,Deakin University,Melbourne,Australia;2.International Business School Suzhou (IBSS),Xian-Jiaotong Liverpool University,Suzhou,China |
| |
Abstract: | Between 2005 and 2009, we document evident time-varying credit risk price discovery between the equity and credit default swap (CDS) markets for 174 US non-financial investment-grade firms. We test the economic significance of a simple portfolio strategy that utilizes fluctuation in CDS spreads as a trading signal to set stock positions, conditional on the CDS price discovery status of the reference entities. We show that a conditional portfolio strategy which updates the list of CDS-influenced firms over time, yields a substantively larger realized return net of transaction cost over the unconditional strategy. Furthermore, the conditional strategy’s Sharpe ratio outperforms a series of benchmark portfolios over the same trading period, including buy-and-hold, momentum and dividend yield strategies. |
| |
Keywords: | |
本文献已被 SpringerLink 等数据库收录! |
|