When a company’s credit default spread widens, stock investors should watch out, particularly if a company is experiencing the second spread widening. This is the conclusion of a new research paper from S&P Capital IQ. The premise of the paper, “Lenders Lead, Owners Follow – the relationship between credit indicators and equity backtested returns,” is that equity investors could do well to pay attention to certain key fixed income signals in a company. CDS spreads: Performance of a company’s fixed debt offerings The performance of a company’s fixed debt offerings can often be an indication of trouble ahead, as stocks…
Widening of CDS Spreads Leads To Stock Underperformance [Study]
Mark Melin
Mark Melin is an alternative investment practitioner whose specialty is recognizing the impact of beta market environment on a technical trading strategy. A portfolio and industry consultant, wrote or edited three books including High Performance Managed Futures (Wiley 2010) and The Chicago Board of Trade’s Handbook of Futures and Options (McGraw-Hill 2008) and taught a course at Northwestern University's executive education program.