Journal article
Strength of co-movement between sector CDS indexes and relationship with major economic and financial variables over time and during investment horizons
Applied economics, v 48(48), pp 4635-4654
13 Oct 2016
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
The main purpose of this article is to analyse the co-movement in both time and frequency between financial sector CDS indexes and between these indexes and their main economic and financial control variables for the period 2004-2014. Empirically, we implement the wavelet-squared coherence methodology to analyse the co-movement through time, frequency and power. Our results unveil that the co-movement between the three financial sectors' CDSs changes through time and investment horizons, stressing the importance of hedging portfolios in real time. Also, we uncover that the changes in co-movement to relatively higher frequencies coincide with the inception of the recent global financial crisis. This result is collaborated with the co-movement between each CDS index and other global risk factors, including crude oil prices, interest rates and equity market volatility. Finally, we compare the wavelet coherence results with those of the DCC-FIAPARCH model and find that the two different approaches provide quite similar conditional correlations over time. Our results are important for investors, debtors, creditors and other decision-makers which are interested in CDS spread co-movements at different frequencies or investment horizons. It would be useful for all market participants to resort to an appropriate frequency domain to have better understanding of the sector CDS interrelationship behaviour in this domain.
Metrics
Details
- Title
- Strength of co-movement between sector CDS indexes and relationship with major economic and financial variables over time and during investment horizons
- Creators
- Besma Hkiri - University of CarthageShawkat Hammoudeh - IPAG Business SchoolChaker Aloui - King Saud University
- Publication Details
- Applied economics, v 48(48), pp 4635-4654
- Publisher
- Routledge
- Grant note
- (RGP-211) / Deanship of Scientific Research at King Saud University
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000382588000004
- Scopus ID
- 2-s2.0-84969916641
- Other Identifier
- 991019167936404721
UN Sustainable Development Goals (SDGs)
This publication has contributed to the advancement of the following goals:
InCites Highlights
Data related to this publication, from InCites Benchmarking & Analytics tool:
- Collaboration types
- Domestic collaboration
- International collaboration
- Web of Science research areas
- Economics