Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/257669 
Authors: 
Year of Publication: 
2020
Citation: 
[Journal:] International Journal of Financial Studies [ISSN:] 2227-7072 [Volume:] 8 [Issue:] 1 [Article No.:] 1 [Publisher:] MDPI [Place:] Basel [Year:] 2020 [Pages:] 1-17
Publisher: 
MDPI, Basel
Abstract: 
Corporate bond defaults in different sectors often increase suddenly at roughly similar times, although some sectors see default rates jump earlier than others. This could reflect contagion among sectors-specifically, defaults in one sector leading to credit stresses in other sectors of the economy that would not otherwise have seen stresses. To complicate matters, simple correlation-based tests for contagion are often biased, reflecting increased volatility in periods of stress. This paper uses sectoral default data from over 30 sectors to test for signs of contagion over the past 30 years. While jumps in sectoral default rates do often coincide, there is no consistent evidence of contagion across different periods of stress from unbiased test results. Instead, coincident jumps in sectoral default rates are likely to reflect common macroeconomic shocks.
Subjects: 
corporate bonds
credit risk
default contagion
JEL: 
G12
G24
G33
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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