Corporate Yield Spreads: Default Risk or Liquidity? New Evidence from the Credit-Default Swap Market

By Francis A. Longstaff, Sanjay Mithal, Eric Neis. 2005

1,978 citations recorded by the source corpus.

View Paper: https://www.semanticscholar.org/paper/8a5d91269691d2ee8a1687639f57df5a4bcc45f1

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Citations in the corpus

Macroeconomic Conditions and the Puzzles of Credit Spreads and Capital Structure (2010, neutral): “The model of Hackbarth, Miao, and Morellec (2006) generates a similar feature, but with a very different mechanism.”
Good and bad credit contagion: Evidence from credit default swaps (2007, neutral): “Other recent empirical work on CDS includes Blanco et al (2005), Houweling and Vorst (2005), Longstaff et al. (2005), and Zhu (2004).”
The Market Price of Risk in Interest Rate Swaps: The Roles of Default and Liquidity Risks (2004, neutral): “Since swap spreads represent the difference between swap rates and Treasury bond yields, they reflect the difference in the default risk of the financial sector quoting Libor rates and the U.S. Treasury.”
Friends or Foes? Target Selection Decisions of Sovereign Wealth Funds and Their Consequences (2011, neutral): “It is defined as the expected default frequency over a one-year horizon, computed from an implementation of Merton's (1974) structural model of individual corporate default probabilities, and is widely used in recent studies (e.”
Inflation Uncertainty, Asset Valuations, and the Credit Spreads Puzzle (2008, positive): “Longstaff, Mithal, and Neis (2006) calibrate a reduced form model to spreads in the credit default swaps market and support the view that default risk accounts for the predominant component of spreads.”
Corporate Bond Liquidity Before and After the Onset of the Subprime Crisis (2012, neutral): “Our results therefore reconcile the ﬁnding in Longstaff, Mithal, and Neis (2005) that bonds issued by ﬁnancial ﬁrms are more illiquid with the ﬁnding in Friewald, Jankowitsch, and Subrahmanyam (forthcoming) that there is no systematic liquidity difference.”
The Determinants of Recovery Rates in the US Corporate Bond Market (2014, positive): “Thus, this time window apparently represents the relevant trading period following default in which investors split up and sell larger positions in defaulted bonds.”
The Impact of Earnings on the Pricing of Credit Default Swaps (2007, neutral): “The paucity of evidence regarding the impact of accounting information generally and earnings in particular on non-equity capital markets likely stems from the limited liquidity of these markets.”
Financial statement comparability and credit risk (2013, positive): “Compared with bond spreads, CDS spreads are less affected by liquidity (Longstaff et al. 2005) and thus provide a cleaner test of hypothesis H2.”
Does the CDS Market Reflect Regulatory Climate Risk Disclosures? (2020, positive): “At the same time, bond spreads are more likely to be affected by differences in contractual arrangements, and hence, are likely contaminated by a liquidity premium (Longstaff et al., 2005).”
The End of Market Discipline? Investor Expectations of Implicit State Guarantees (2013, neutral): “Since we do not have bond trades for the full sample period, we create a liquidity measure based on bond characteristics following Longstaff et al. (2005).”
Insider Trading in Credit Derivatives (2005, positive): “Longstaff, Mithal, and Neis (2003) examine weekly lead-lag relations between CDS spread changes, corporate bond spreads, and stock returns of U.S. firms in a VAR framework.”
Credit Spreads: An Empirical Analysis on the Informational Content of Stocks, Bonds, and CDS (2009, positive): “6 Odders-White and Ready (2006) have documented a negative relationship between credit rating and stock liquidity, for instance, and Longstaff et al. (2005) et al. (2005), 40 in Norden and Weber (2005) and 16 in Zhu (2006).”