Financial Crises and Information Transfer

This study examines the lead-lag-relationship between European equity and CDSmarkets in the context of the financial crisis. Previous research identified the stock market tolead the CDS market in an ordinary economic environment. Against the background of ourstudy this lead-lag-relationship strengthens when moving from the non-crisis- to the crisisscenarioon a daily as well as on a weekly basis. Hence, we conclude that information transferfrom stock to CDS markets widens during the financial crisis. In addition and in contrast tothe literature we find an extraordinary day-of-the-week-effect on weekly returns as ananomaly for information processing.