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Journal of Financial Stability Vol. 43 2019

The impact of trade reporting and central clearing on CDS price informativeness

Miriam Marra1,2; Fan Yu3; Lu Zhu4

1 ICMA Centre · 2 University of Reading · 3 Claremont McKenna College · 4 California State University, Long Beach

Abstract

We find that the magnitude of unique credit default swap (CDS) market information (constructed to be orthogonal to contemporaneous and lagged stock returns) declined after recent reforms that increased the level of post-trade regulatory and market transparency for CDSs. Around the same reforms, the ability of this CDS-unique information to predict future stock returns decreased. These results suggest the CDS market has become less of a “hidden” trading venue for informed investors since central clearing and trade reporting started.

DOI
10.1016/j.jfs.2019.07.002
Volume
43
Pages
130-145
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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