Corporate Profit and Credit Spread Dynamics
Posted: 14 Aug 2014
Date Written: August 14, 2014
Abstract
This study examines the dynamic response of credit spread (CS) to corporate profit growth (CP) shock. Using the bivariate VAR model to analyze quarterly data from 1952Q1 to 2012Q4, the results show that credit spread drops immediately following the positive shock to corporate profit growth, and it stays stably low for the horizon of 8 quarters. The Granger causality Wald tests indicate a causal linkage between credit spread and corporate profit growth.
Keywords: corporate profit growth, credit spread, VAR
JEL Classification: G12, G14, G17
Suggested Citation: Suggested Citation
Sum, Vichet, Corporate Profit and Credit Spread Dynamics (August 14, 2014). Available at SSRN: https://ssrn.com/abstract=2480308
Feedback
Feedback to SSRN
If you need immediate assistance, call 877-SSRNHelp (877 777 6435) in the United States, or +1 212 448 2500 outside of the United States, 8:30AM to 6:00PM U.S. Eastern, Monday - Friday.