Related securities and equity market quality: the case of CDS

• Main Authors: Ekkehart BOEHMER, CHAVA, Sudheer, TOOKES, Heather E.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2015
• Subjects: CREDIT DEFAULT SWAPS; CORPORATE BOND MARKET; EMPIRICAL-ANALYSIS; STOCK RETURNS; OPTION VOLUME; FINANCIAL INNOVATION; TIME-SERIES; TRANSPARENCY; EFFICIENCY; LIQUIDITY; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/4978
• Institution: Singapore Management University

We document that equity markets become less liquid and equity prices become less efficient when markets for single-name credit default swap (CDS) contracts emerge. This finding is robust across a variety of market quality measures. We analyze the potential mechanisms driving this result and find evi...