Informational Efficiency in Distressed Markets: The Case of European Corporate Bonds

Abstract: This paper investigates the effect of the 2008 financial crisis on informational efficiency by carrying out a long-memory analysis of European corporate bond markets. We compute the Hurst exponent for fifteen sectorial indices to scrutinise the time-varying behaviour of long-range memory, applying a shuffling technique to avoid short-term correlation. We find that the financial crisis has uneven effects on the informational efficiency of all corporate bond sectors, especially those related to financial services. However, their vulnerability is not homogeneous and some non-financial sectors suffer only a transitory effect.