Journal article
Distribution specific dependence and causality between industry-level U.S. credit and stock markets
Journal of international financial markets, institutions & money, v 52
Jan 2018
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
•Dependence and causal nexuses between ten U.S. credit default swaps and their corresponding stock sectoral markets.•Quantile-on-Quantile (QQ) approach and the nonparametric causality-in-quantiles tests.•Negative and asymmetric relationships between the CDS and stock markets across the quantiles.•Link depends on both the sign and size of the stock market shocks.•Causality-in-mean from stock to CDS only for the Financial, the Consumer Services and the Oil & Gas sectors.•A bidirectional Granger causality-in-variance for all the CDS-equity sector pairs.
This paper examines the dependence and causal nexuses between ten U.S. credit default swaps and their corresponding stock sectoral markets, using the Quantile-on-Quantile (QQ) approach and the nonparametric causality-in-quantiles tests. The results, using the QQ approach, show asymmetric negative association between credit and markets for all industries and that the link depends on both the sign and size of the stock market shocks (i.e., bullish or bearish conditions in the CDS and/or stock markets). The sensitivity of CDS returns to stock markets shocks is higher in the extreme quantiles. Using the nonparametric causality-in-quantile tests, we find evidence of causality-in-mean from stock to CDS only for the Financial (in average and upper quantiles), Consumer Services and Oil & Gas sectors (only for the middle quantile i.e., 0.5). In addition, the causality-in-mean from the CDS to stock markets is only found for the Financial and Telecommunication sectors in the extreme lower quantiles. Finally, we find a bidirectional Granger causality-in-variance for all the CDS-equity sector pairs.
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Details
- Title
- Distribution specific dependence and causality between industry-level U.S. credit and stock markets
- Creators
- Syed Jawad Hussain Shahzad - COMSATS University IslamabadWalid Mensi - Sultan Qaboos UniversityShawkat Hammoudeh - Drexel UniversityMehmet Balcilar - Eastern Mediterranean UniversityMuhammad Shahbaz - Montpellier Business School
- Publication Details
- Journal of international financial markets, institutions & money, v 52
- Publisher
- Elsevier
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000418493800008
- Scopus ID
- 2-s2.0-85029686666
- Other Identifier
- 991019167748604721
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- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Business, Finance
- Economics