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Earnings Announcements In The Credit Default Swap Market - An Event Study
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Business Studies.
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Business Studies.
2014 (English)Independent thesis Advanced level (degree of Master (Two Years)), 20 credits / 30 HE creditsStudent thesis
Abstract [en]

This paper investigates the European CDS markets response to earnings announcements between the years 2011-2013. Through the use of event study methodology, we investigate if the CDS market reacts to earnings news in terms of abnormal spread changes. Furthermore, by exploring the pre- and post announcement window the study examines the efficiency of the CDS market. The results imply that earnings announcements provide valuable information to the CDS market, with statistically significant results on the 5 % and 10 % significant level for negative and positive news respectively. Additionally, the paper shows that the market has a rather symmetric reaction to negative and positive earnings news since there is no significant difference in effects. The paper further reveals that there is no significant difference in the response between different credit rating groups. In terms of market efficiency, the study cannot confirm that there is anticipation for earnings announcements. The study further shows that there is no post-earnings announcement drift in the CDS market and that the market, overall, is efficient in incorporating the information into the spreads. Finally, a cross-sectional regression analysis confirms that negative earnings surprises are linked to large announcement day reactions, while positive earnings surprises are not.   

Place, publisher, year, edition, pages
2014. , 47 p.
Keyword [en]
Credit default swaps, European CDS market, Earnings announcements, Earnings surprises, Event study, Market efficiency
National Category
Business Administration
Identifiers
URN: urn:nbn:se:uu:diva-226706OAI: oai:DiVA.org:uu-226706DiVA: diva2:726990
Subject / course
Business Studies
Educational program
Master Programme in Business and Management
Supervisors
Available from: 2014-06-23 Created: 2014-06-19 Last updated: 2014-06-23Bibliographically approved

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