We analyze the determinants and effects of credit default swap (CDS) trading initiation on sovereign bonds. For high default risk countries, CDS initiation provides significant price efficiency benefits in the underlying market. CDS initiation also reduces average risk premiums, with reductions...

Market anomaly is an important phenomenon in finance because it challenges an essential concept in modern finance, the Efficient Market Hypothesis. Traditionally, professors rarely demonstrate and statistically test market anomalies in undergraduate finance classes due to the lengthy data...