Price discovery in the CDS market: the informational role of equity short interest

This paper documents a negative relation between equity short interest and future returns on credit default swaps (CDS). This relation is most consistent with the theory that equity short interest telegraphs relevant information to secondary market CDS investors about credit spread not transmitted into prices in other ways. The CDS return predictive pattern also strengthens negatively for equity short-interest positions subject to an outward shift in the demand for shortable stocks, which we view as a proxy for the expected benefits of private information (Cohen et al. in J Finance 62(5):2061–2096, 2007). This suggests that features of the shorting market may help explain the lagged response of CDS spreads to equity short interest. Our tests of economic significance, however, do not support the view that the CDS return predictive pattern is strong enough to cover the round-trip cost of trading in the secondary CDS market

Intradaily Price-Volume Adjustments of NYSE Stocks to Unexpected Earnings.

The speed and path of adjustment in stocks to the degree of earnings surprise in their quarterly announcements is studied using price-volume transactions data. A differential price adjustment process was observed, with stocks having large, positive earnings surprises experiencing a faster adjustment compared to those stocks with negative earnings surprises. Volume, transaction frequency, and size were found to be directly related to the absolute degree of surprise, but very favorable earnings surprise stocks experienced initially a large number of smaller trades while stocks with large unfavorable earnings surprises had relatively fewer transactions but higher volume per trade. Copyright 1988 by American Finance Association.

Texas Business Review, April 1977

Inflation and Consumer Financial Wealth; Investing in the Texas Over-the-Counter Securities Market; Texas ConstructionBureau of Business Researc