Connectedness between US industry level credit markets and determinants

Syed Jawad Hussain Shahzad; Ghulam Mujtaba Kayani; Syed Ali Raza; Nida Shah; Khamis H. Al-Yahyaee

doi:10.1016/j.physa.2017.09.060

Connectedness between US industry level credit markets and determinants

Syed Jawad Hussain Shahzad^*, Ghulam Mujtaba Kayani, Syed Ali Raza, Nida Shah, Khamis H. Al-Yahyaee

^*Corresponding author for this work

Economics & Finance

Research output: Contribution to journal › Article › peer-review

11 Citations (Scopus)

Abstract

We examine the connectedness between US industry-level credit markets, using both Credit Default Spread (CDS) changes and volatilities, over the period from December 17, 2007, to November 13, 2015. The total, net directional and pairwise spillovers are estimated based on the generalized VAR framework developed by Diebold and Yilmaz (2012). The empirical analysis shows strong interactions for CDS spread change and volatility among all ten industries. Consumer Services and Basic Materials are the significant risk transmitters. Economic policy uncertainty and different market volatilities significantly determine credit market risk spillovers which also increase during market turbulence situations indicating a possible contagion effect. Implications of the findings are discussed.

Original language	English
Pages (from-to)	874-886
Number of pages	13
Journal	Physica A: Statistical Mechanics and its Applications
Volume	491
DOIs	https://doi.org/10.1016/j.physa.2017.09.060
Publication status	Published - Feb 1 2018

Keywords

Credit default swaps
Network connectedness
Spillover index approach

ASJC Scopus subject areas

Statistical and Nonlinear Physics
Statistics and Probability

Access to Document

10.1016/j.physa.2017.09.060

Cite this

@article{b0af4c7986ac4c4fb3db832a772d8858,

title = "Connectedness between US industry level credit markets and determinants",

abstract = "We examine the connectedness between US industry-level credit markets, using both Credit Default Spread (CDS) changes and volatilities, over the period from December 17, 2007, to November 13, 2015. The total, net directional and pairwise spillovers are estimated based on the generalized VAR framework developed by Diebold and Yilmaz (2012). The empirical analysis shows strong interactions for CDS spread change and volatility among all ten industries. Consumer Services and Basic Materials are the significant risk transmitters. Economic policy uncertainty and different market volatilities significantly determine credit market risk spillovers which also increase during market turbulence situations indicating a possible contagion effect. Implications of the findings are discussed.",

keywords = "Credit default swaps, Network connectedness, Spillover index approach",

author = "Shahzad, {Syed Jawad Hussain} and Kayani, {Ghulam Mujtaba} and Raza, {Syed Ali} and Nida Shah and Al-Yahyaee, {Khamis H.}",

note = "Publisher Copyright: {\textcopyright} 2017 Elsevier B.V.",

year = "2018",

month = feb,

day = "1",

doi = "10.1016/j.physa.2017.09.060",

language = "English",

volume = "491",

pages = "874--886",

journal = "Physica A: Statistical Mechanics and its Applications",

issn = "0378-4371",

publisher = "Elsevier",

}

TY - JOUR

T1 - Connectedness between US industry level credit markets and determinants

AU - Shahzad, Syed Jawad Hussain

AU - Kayani, Ghulam Mujtaba

AU - Raza, Syed Ali

AU - Shah, Nida

AU - Al-Yahyaee, Khamis H.

PY - 2018/2/1

Y1 - 2018/2/1

N2 - We examine the connectedness between US industry-level credit markets, using both Credit Default Spread (CDS) changes and volatilities, over the period from December 17, 2007, to November 13, 2015. The total, net directional and pairwise spillovers are estimated based on the generalized VAR framework developed by Diebold and Yilmaz (2012). The empirical analysis shows strong interactions for CDS spread change and volatility among all ten industries. Consumer Services and Basic Materials are the significant risk transmitters. Economic policy uncertainty and different market volatilities significantly determine credit market risk spillovers which also increase during market turbulence situations indicating a possible contagion effect. Implications of the findings are discussed.

AB - We examine the connectedness between US industry-level credit markets, using both Credit Default Spread (CDS) changes and volatilities, over the period from December 17, 2007, to November 13, 2015. The total, net directional and pairwise spillovers are estimated based on the generalized VAR framework developed by Diebold and Yilmaz (2012). The empirical analysis shows strong interactions for CDS spread change and volatility among all ten industries. Consumer Services and Basic Materials are the significant risk transmitters. Economic policy uncertainty and different market volatilities significantly determine credit market risk spillovers which also increase during market turbulence situations indicating a possible contagion effect. Implications of the findings are discussed.

KW - Credit default swaps

KW - Network connectedness

KW - Spillover index approach

UR - http://www.scopus.com/inward/record.url?scp=85031757114&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85031757114&partnerID=8YFLogxK

U2 - 10.1016/j.physa.2017.09.060

DO - 10.1016/j.physa.2017.09.060

M3 - Article

AN - SCOPUS:85031757114

SN - 0378-4371

VL - 491

SP - 874

EP - 886

JO - Physica A: Statistical Mechanics and its Applications

JF - Physica A: Statistical Mechanics and its Applications

ER -

Connectedness between US industry level credit markets and determinants

Abstract

Keywords

ASJC Scopus subject areas

Access to Document

Other files and links

Fingerprint

Cite this