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

Research output: Contribution to journalArticle

6 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 languageEnglish
Pages (from-to)874-886
Number of pages13
JournalPhysica A: Statistical Mechanics and its Applications
Volume491
DOIs
Publication statusPublished - Feb 1 2018

Keywords

  • Credit default swaps
  • Network connectedness
  • Spillover index approach

ASJC Scopus subject areas

  • Statistics and Probability
  • Condensed Matter Physics

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