The determinants of credit risk: analysis of US industry - level indices

Shahzad, S.J.H. and Nor, S.M. and Sanusi, N.A. and Kumar, Ronald R. (2017) The determinants of credit risk: analysis of US industry - level indices. Global Business Review, 19 (5). pp. 1-14. ISSN 0972-1509

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Abstract

The study examines the cointegration and causal relationship between credit default swap spreads, stock prices, VIX, interest rate and slope of the yield curve for the 10 industries in the USA over the period 14 December 2007 to 30 September 2015. Due to the presence of cross-sectional dependence in the panel, we employ the Pesaran (2007, Journal of Applied Econometrics, 22(2), 265–312) CIPS test to ascertain unit root properties. The cointegration test underscores the presence of a long-run association between the variables. The long-run heterogeneous panel elasticities are estimated via Dynamic OLS (DOLS) and the causality is examined by using the Dumitrescu and Hurlin (2012, Economic Modelling, 29(4), 1450–1460) Granger causality tests. The empirical results reveal that stock prices (volatility), interest rate and slope of the yield curve decrease (increase) the CDS premia; and stock prices, VIX and interest rate Granger-cause the CDS spreads for most of the industries.

Item Type:	Journal Article
Subjects:	H Social Sciences > HA Statistics H Social Sciences > HG Finance
Divisions:	Faculty of Business and Economics (FBE) > School of Accounting and Finance
Depositing User:	Ronald Kumar
Date Deposited:	17 Jan 2018 03:08
Last Modified:	17 Jan 2018 03:08
URI:	https://repository.usp.ac.fj/id/eprint/10383

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