Abstract:This paper examines the effects of public news releases on the market liquidity in one of the most important OTC derivatives markets-the CDS market. We document that, at the time of news releases, the bid-ask spread is wider, the number of quotes is larger, and the number of dealers is greater. Earnings announcements have particularly strong effects on liquidity while news related to credit ratings has no significant effects. Moreover, the bid-ask spread only increases on news release days and reverts to norma… Show more
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