The authors are especially grateful to Editor Bonnie Van Ness and an anonymous reviewer for many helpful comments. They also thank Kyongwook Choi, Farooq Malik, and Michael McAleer for responding to their questions and providing valuable comments.
Relationships between Financial Sectors’ CDS Spreads and Other Gauges of Risk: Did the Great Recession Change Them?
Article first published online: 19 MAR 2013
© 2013, The Eastern Finance Association
Volume 48, Issue 1, pages 151–178, February 2013
How to Cite
Hammoudeh, S., Bhar, R. and Liu, T. (2013), Relationships between Financial Sectors’ CDS Spreads and Other Gauges of Risk: Did the Great Recession Change Them?. Financial Review, 48: 151–178. doi: 10.1111/j.1540-6288.2012.00350.x
- Issue published online: 21 JAN 2013
- Article first published online: 19 MAR 2013
- great recession;
- quantitative easing
The objectives are to discern how the three financial sectors’ credit default swap (CDS) spreads interrelate to each other and with three other risks in terms of possible contagion, competition, interdependence and independence relations under the full sample and two subperiods: the 2007 Great Recession and the 2009 Recovery, and to assess the impact of QE1 on those risks in the second subperiod. The results indicate that the own and cross-effects among the CDSs and the other risk measures are significant and mixed, but all in all contagion is dominant. The system has become less stable and less adjusting to the equilibrium in the first subperiod. QE1 in the second period decreases risks but increases inflationary expectations.