Information content in CDS spreads for equity returns

•We explore the predictability of equity returns using information from credit protection returns.•Equity returns can predict credit protection returns up to 5 days, especially for non-investment firms in turmoil market.•Credit protection returns are more sensitive to lagged equity returns if credit deteriorates in CDS market previously.•One-day-ahead equity returns significantly respond to credit protection returns around the credit rating announcement.•Market is over-reactive to the potential positive credit rating announcement.