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- Publisher Website: 10.1111/fima.12364
- Scopus: eid_2-s2.0-85106646362
- WOS: WOS:000655696900001
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Article: Does the Federal Open Market Committee cycle affect credit risk?
Title | Does the Federal Open Market Committee cycle affect credit risk? |
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Authors | |
Keywords | Credit default swap Cycle Fed FOMC Monetary policy |
Issue Date | 2022 |
Citation | Financial Management, 2022, v. 51, n. 1, p. 143-167 How to Cite? |
Abstract | This paper studies the returns of credit default swap (CDS) indices over the Federal Open Market Committee (FOMC) cycle. We document that the CDS return is significantly higher in even weeks than in odd weeks of the FOMC cycle. The biweekly pattern in the CDS market is not a mere reflection of that in the stock market. A simple trading strategy based on the biweekly pattern yields an annual excess return of 8.8%. This pattern is linked to the resolution of macroeconomic uncertainty by the biweekly schedules of the Fed Reserve internal Board of Governors meetings. We provide further evidence that the Fed affects the CDS market via unexpected information signals and monetary policies that lead to reductions in the risk premium. |
Persistent Identifier | http://hdl.handle.net/10722/321938 |
ISSN | 2023 Impact Factor: 2.9 2023 SCImago Journal Rankings: 2.131 |
ISI Accession Number ID |
DC Field | Value | Language |
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dc.contributor.author | Huang, Difang | - |
dc.contributor.author | Li, Yubin | - |
dc.contributor.author | Wang, Xinjie | - |
dc.contributor.author | Zhong, Zhaodong | - |
dc.date.accessioned | 2022-11-03T02:22:29Z | - |
dc.date.available | 2022-11-03T02:22:29Z | - |
dc.date.issued | 2022 | - |
dc.identifier.citation | Financial Management, 2022, v. 51, n. 1, p. 143-167 | - |
dc.identifier.issn | 0046-3892 | - |
dc.identifier.uri | http://hdl.handle.net/10722/321938 | - |
dc.description.abstract | This paper studies the returns of credit default swap (CDS) indices over the Federal Open Market Committee (FOMC) cycle. We document that the CDS return is significantly higher in even weeks than in odd weeks of the FOMC cycle. The biweekly pattern in the CDS market is not a mere reflection of that in the stock market. A simple trading strategy based on the biweekly pattern yields an annual excess return of 8.8%. This pattern is linked to the resolution of macroeconomic uncertainty by the biweekly schedules of the Fed Reserve internal Board of Governors meetings. We provide further evidence that the Fed affects the CDS market via unexpected information signals and monetary policies that lead to reductions in the risk premium. | - |
dc.language | eng | - |
dc.relation.ispartof | Financial Management | - |
dc.subject | Credit default swap | - |
dc.subject | Cycle | - |
dc.subject | Fed | - |
dc.subject | FOMC | - |
dc.subject | Monetary policy | - |
dc.title | Does the Federal Open Market Committee cycle affect credit risk? | - |
dc.type | Article | - |
dc.description.nature | link_to_subscribed_fulltext | - |
dc.identifier.doi | 10.1111/fima.12364 | - |
dc.identifier.scopus | eid_2-s2.0-85106646362 | - |
dc.identifier.volume | 51 | - |
dc.identifier.issue | 1 | - |
dc.identifier.spage | 143 | - |
dc.identifier.epage | 167 | - |
dc.identifier.eissn | 1755-053X | - |
dc.identifier.isi | WOS:000655696900001 | - |