Economic policy uncertainty, CDS spreads, and CDS liquidity provision

Wang, Xinjie1; Xu, Weike2; Zhong, Zhaodong (Ken)3

2019-04

10.1002/fut.21982

JOURNAL OF FUTURES MARKETS   影响因子和分区

0270-7314

1096-9934

Using a news-based index of economic policy uncertainty (EPU), we find that EPU is positively associated with credit default swap (CDS) spreads and negatively associated with the number of liquidity providers in the CDS market. A 10% increase in EPU leads to an 8.4% increase in CDS spreads and a 4.0% decrease in the number of liquidity providers. Furthermore, the effects of EPU are persistent and robust after controlling for macroeconomic variables. Our results are also robust to different econometric methodologies. Overall, our findings suggest that, when EPU is high, investors find credit protection more costly and difficult to purchase.

credit default swap liquidity provision market depth policy uncertainty

SSCI

英语

第一

Southern University of Science and Technology[Y01246210] ; Southern University of Science and Technology[Y01246110]

Business & Economics

Business, Finance

WOS:000460317600004

WILEY

ECONOMICS BUSINESS

Web of Science

1.Southern Univ Sci & Technol, Dept Finance, Shenzhen, Peoples R China
2.Clemson Univ, Dept Finance, Coll Business, Clemson, SC USA
3.Rutgers State Univ, Rutgers Business Sch, Dept Finance & Econ, Piscataway, NJ 08854 USA

Wang, Xinjie,Xu, Weike,Zhong, Zhaodong . Economic policy uncertainty, CDS spreads, and CDS liquidity provision[J]. JOURNAL OF FUTURES MARKETS,2019,39(4):461-480.

Wang, Xinjie,Xu, Weike,&Zhong, Zhaodong .(2019).Economic policy uncertainty, CDS spreads, and CDS liquidity provision.JOURNAL OF FUTURES MARKETS,39(4),461-480.

Wang, Xinjie,et al."Economic policy uncertainty, CDS spreads, and CDS liquidity provision".JOURNAL OF FUTURES MARKETS 39.4(2019):461-480.