Recent empirical researches analyze the relationship between credit default swaps (CDS) and equity market by using historical stock returns which contain market risk, credit risk, and other risks such as operational risk. Prior studies are not able to document that the relationship between the two markets while differentiating impacts of market risk or credit risks. This research employs factor models to mainly control market risk and then use the estimated values of stock returns and abnormal returns to explain pricing dynamics of CDS. The main conclusion reveals that comparing with historical stock returns, the returns net of market risk factors for equity markets strengthen the price discovery of CDS. The balanced-panel sample contains 197 individual corporations with period starts January 2004 and ends December 2008.