scholarly journals Good News is No News? The Impact of Credit Rating Changes on the Pricing of Asset-Backed Securities

2004 ◽  
Author(s):  
John Matthew Ammer ◽  
Nathanael Clinton
Keyword(s):  
Credit Rating ◽  
Good News ◽  
Rating Changes ◽  
Asset Backed Securities ◽  
The Impact

scholarly journals Good News Is No News? The Impact of Credit Rating Changes on the Pricing of Asset-Backed Securities

2004 ◽  
Vol 2004 (809) ◽  
pp. 1-28 ◽  
Author(s):  
John Ammer ◽  
◽  
Nathanael Clinton
Keyword(s):  
Credit Rating ◽  
Good News ◽  
Rating Changes ◽  
Asset Backed Securities ◽  
The Impact

Sovereign credit rating and contagion effects on financial markets of Asian region

2020 ◽  
Vol 2020 (6) ◽  
pp. 48-69
Author(s):  
Natalia Pivnitskaya ◽  
Tamara Teplova
Keyword(s):  
Financial Markets ◽  
Credit Rating ◽  
Contagion Effect ◽  
Rating Agencies ◽  
Sovereign Credit ◽  
Asian Region ◽  
Contagion Effects ◽  
Rating Changes ◽  
The Impact ◽  
Sovereign Credit Rating

This article studies the contagion effects on the emerging financial markets of the Asian region. The contagion effect is manifested in the change of interconnection degree of financial markets after the shock in one of the countries of the region. In the paper, we consider the information on potential or actual change in sovereign credit rating as a shock leading to a contagion effect. Our sample includes evidence from 7 Asian countries covering the period from 2000 to 2018. We use the DCC-GARCH model which allows us to take into account the peculiarities of financial data behavior. We intend to show the effect of inconsistencies in ratings assigned by various agencies on strengthening or weakening the processes of contagion on Asia’s stock markets. We also study the impact of historical inconsistencies between credit rating outlooks and actual rating changes on the level of «trust» to credit outlooks in the future. In assessing the impact of discrepancies we assume that the market remembers recent events better than more distant in time. We were able to confirm the impact of inconsistencies in the ratings given by different rating agencies for China, Hong Kong, and India. In addition, we found that the presence of inconsistencies between the outlooks and actual rating updates in the past tend to weaken the trust regarding positive outlooks rather than negative ones.

scholarly journals The impact of credit rating as scoring methods on GCC market indexes

2017 ◽  
Vol 14 (3) ◽  
pp. 223-235
Author(s):  
Nassima Debab ◽  
Ayman Matter Al Mahari
Keyword(s):  
Stock Markets ◽  
Credit Rating ◽  
Stock Market Index ◽  
Credit Rating Agency ◽  
Rating Agency ◽  
Market Index ◽  
Rating Changes ◽  
Market Indexes ◽  
The Impact

The aim of this paper is to investigate whether country credit rating changes announcement has a significant impact on GCC Stock Market Index. As per researcher knowledge, none has been done on the GCC. Using event study methods in estimation of the relationship between the credit rating agency Moody’s and GCC stock markets indexes over 11 years period between 2004 to Jun 2015. The sample of this study is relatively related to GCC stock markets indexes, it focuses on all the long-term country credit rating decisions by Moody’s and its impact on short-terms investments and stock markets. Moreover it considers the gap between long-terms and the short-terms investor singular events. The result of our paper indicate that the impact of credit rating agency Moody’s on GCC Stock Markets Indexes is insignificant and have no impact, taking into consideration the impact of 2008 financial crisis.

scholarly journals Credit Rating Changes and Stock Market Reaction in the Kingdom of Bahrain

2016 ◽  
Vol 8 (8) ◽  
pp. 23 ◽  
Author(s):  
Marwan M. Abdeldayem ◽  
Ramzi Nekhili
Keyword(s):  
Stock Market ◽  
Event Study ◽  
Stock Prices ◽  
Banking Sector ◽  
Credit Rating ◽  
Market Reaction ◽  
Stock Market Reaction ◽  
Rating Changes ◽  
The Impact

<p>Between 2014 and 2015, the oil price almost halved. Since then, it has fallen a further 40%. Consequently, Moody’s Investors Service has downgraded Bahrain’s long-term issuer rating from Baa3 to Ba1with a negative outlook and placed it on review for further downgrade. In this context, previous literature reaches no agreement about the impact of credit rating changes on stock prices. Some studies indicate that credit rating changes do not affect stock prices, while others conclude they do. Therefore, this study aims to examine whether credit rating change has a significant impact on Bahraini stock prices. We conducted an event study to analyze stock market reaction to such news in the Kingdom of Bahrain. Even though Bahrain has witnessed a series of sovereign downgrades over the past five years, the latest downgrading event in February 17, 2016, has been followed by a credit rating downgrade of its banking sector in March 7, 2016. Hence the choice of the sample period of the event study includes both these downgrading events over the period of study from January 2, 2014 till March 22, 2016. Three sectors were selected from the Bahrain all share index: banks, service and industrial. The findings of the study reveal that sovereign rating downgrade has some mixed pre-announcement and post-announcement effects and credit rating downgrade provides useful information. Overall, the results indicate that downgrades and negative outlook announcements have an adverse impact on long-term equity returns, but little impact on short-term performance.</p>

scholarly journals Impacts of credit rating changes on stock returns

2020 ◽  
Vol 2 (1) ◽  
Author(s):  
Pham Quynh Chau ◽  
Nguyen Thu Hien
Keyword(s):  
Market Efficiency ◽  
Stock Returns ◽  
Stock Prices ◽  
Credit Rating ◽  
Credit Ratings ◽  
Stock Exchanges ◽  
Listed Firms ◽  
Stock Market Efficiency ◽  
Rating Changes ◽  
The Impact

This paper studies the impact of credit ratings issued by CIC, a Vietnamese local rating agency, on stock returns of listed companies on the Vietnamese stock exchanges in the period of 2007-2010. The findings of the study confirm the assertions of the previous researches by Holthausen and Leftwich (1986), Hand, Holthausen and Leftwich (1992), Chan and Poor (2008). Specifically, CIC’s credit ratings slightly affect the stock prices of the listed firms, an evidence supporting CIC’s role and its rating quality to a certain extent. This paper also confirms semi-strong form of the Vietnamese stock market efficiency.

scholarly journals ESG as a Measure of Credit Ratings

Risks ◽  
2021 ◽  
Vol 9 (12) ◽  
pp. 226
Author(s):  
Patrycja Chodnicka-Jaworska
Keyword(s):  
Financial Institutions ◽  
Credit Rating ◽  
Negative Impact ◽  
Credit Ratings ◽  
Stock Exchanges ◽  
Credit Rating Agencies ◽  
Rating Agencies ◽  
Thomson Reuters ◽  
Rating Changes ◽  
The Impact

The aim of this study was to examine the impact of environmental, social, and governance (ESG) measures on credit ratings given to non-financial institutions by the largest credit rating agencies according to economic sector divisions. The hypotheses were as follows: a strong negative impact on non-financial institutions’ credit rating changes will result from ESG risk changes, and the reaction of credit rating changes will vary in different sectors. Panel event models were used to verify these hypotheses. The study used data from the Thomson Reuters Database for the period 2010–2020. The analysis was based on the literature on credit rating determinants and on papers and reports on COVID-19, ESG factors, and their impact on credit rating changes. Linear decomposition was used for the analysis. To verify these hypotheses, long-term issuer credit ratings presented by Moody’s and Fitch for European companies listed on these stock exchanges have been used. In the analyses, financial and non-financial factors were also considered. The results suggested that, within the last year, the methodology presented by credit rating agencies has changed, and ESG factors are one of the basic measures that are used to verify credit rating changes, especially those related to the pandemic.

The Impact of Credit Rating Change on Investor Sentiment

2019 ◽  
Vol 27 (1) ◽  
pp. 85-111
Author(s):  
Doojin Ryu ◽  
Karam Kim ◽  
Heejin Yang
Keyword(s):  
Behavioral Finance ◽  
Credit Rating ◽  
Abnormal Returns ◽  
Investor Sentiment ◽  
Firm Level ◽  
Cumulative Abnormal Returns ◽  
Rating Changes ◽  
The Impact ◽  
Fundamental Values ◽  
Rating Downgrades

The behavioral finance literature focuses on the effect of investor sentiment on the fundamental values of individual stocks. This study constructs a firm-level investor sentiment indicator based on transaction and price data for individual firms and shows that credit rating changes affect investor sentiment. We find the following empirical results. First, the response of investor sentiment to upgrades (downgrades) is significantly positive (negative). Second, the greater the magnitude of the downgrade is, the more negative the investor sentiment reaction is, although we do not find a similar result for upgrades. Third, cumulative abnormal returns around the event day are affected by cumulative abnormal sentiment before that day. This result suggests that the market reaction is affected by a combination of credit rating downgrades and investor sentiment.

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