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Slow- and fast-moving information content of CDS spreads: new endogenous systematic factors

Research output: Contribution to Journal/MagazineJournal articlepeer-review

<mark>Journal publication date</mark>31/01/2021
<mark>Journal</mark>European Journal of Finance
Issue number1-2
Number of pages22
Pages (from-to)136-157
Publication StatusPublished
Early online date23/09/19
<mark>Original language</mark>English


This paper proposes two new Credit Default Swap (CDS) endogenous systematic factors constructed from peer-CDS information. The factors capture slow-moving credit risk information, as well as fast-moving newly arrived market information embedded in the most recent CDS quotes. Using a sample of U.S. non-financial listed firms from 2002 to 2011, we find that these two endogenous systematic factors dominate firm-specific factors and other widely known systematic factors in in-sample and out-of-sample CDS spread predictions.