Liquidity Spillover from Stock Market to CDS market

This paper analyzes the relationship between CDS spread and the liquidity spillover. We conduct pooled regression model, fixed effects model and random effects model in our panel data. In order to capture the liquidity spillover from the stock market, we use bid-ask spread, Amivest illiquidity ratio, turnover rate, and trading period as proxies in our tests. We find substantial liquidity spillover from the stock market after the structural changes. These results provide a different information on CDS spread.