Current Account Balance Macroeconomic Variables

29 exchange rates has the most significant variable, while the domestic interest rate has a slightly effect on SCDS spreads. Table 2.2 will be showing the overview of previous research that had conducted by some of the researchers. Table 2.2 Overview Previous Research No Resercher Analysis model Dependent Variables Independent Variables Result Journal Number 1 Alexander and Andreas 2008 Linear regression and Markov switching regression CDS spreads Interest rate, stock return, implied volatility All of the variables that is interest rate, stock return, and implied volatility are significant toward the CDS spreads. Journal of Banking Finance 32 2008 1008 –1021 2 Greatrex 2008 Multivariat e regression model CDS spreads Stock retuns, leverage ratio, volatility, the rating based index, treasury rate, slope of yield curve. A rating-based CDS index that accounts for both credit risk and overall market conditions is the best predictor of CDS spread changes. Leverage and volatility, are also key determinants, as these two variables can Fordham University Discussion Paper No: 2008-05, March 2008 30 No Researcher Analysis Model Dependent Variable Independent Variable Result explain almost half of the explained variation in monthly CDS spread changes. Journal Number 3 Baum and Wan 2010 OLS and fixed-effect regression CDS spread Macroecono mic uncertainty computed by the conditional variance of the GDP growth rate, the index of industrial production and the returns on the SP 500 Composite Index.; market value; leverage ratio; ROE; Dividend payout ratio. Macroeconomic uncertainty has significant explanatory power over and above that of traditional macroeconomic factors such as the risk-free rate and the Treasury term spread. Applied Financial Economics Taylor Francis Journal vol. 20 15 page: 1163-1171 4 Tang and Yan 2010 Regression Corporate credit spread Firm CDS data; GDP growth rate; GDP growth volatility; Jump risk; Investor sentiment; CVCF; Firms At the market level, investor sentiment is the most important determinant of credit spreads. At the firm level, credit spreads Journal of Banking and Finance 34, 743-753, 2010