Does it really hurt ? An empirical investigation of the effects of downgradings and negative watches on European bond spreads
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1 janvier 2011
- handle: 10670/1.3p2of1
- hal: hal-02312649
- doi: 10.3905/jfi.2011.20.3.086
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info:eu-repo/semantics/altIdentifier/doi/10.3905/jfi.2011.20.3.086
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Bond markets Market, Bond SORT Commonwealth, The Administration Probability Statistical inference Political thought Government Political theory Civil government Commonwealth, The Science, Political Administration Politics Aches Specie Monetary question Money, Primitive Currency Standard of value Philosophy--Methodology Administration Article Funds Funding Pattern Model Borrowing Watches Timepieces Writers Administration Public administration--Law and legislation Law, Administrative Estates, Administration of Administration Finance, commerce, confiscations, etcCiter ce document
Jean-Noël Ory et al., « Does it really hurt ? An empirical investigation of the effects of downgradings and negative watches on European bond spreads », HAL-SHS : économie et finance, ID : 10.3905/jfi.2011.20.3.086
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Résumé
Who feels the most pain when credit rating agencies announce a downgrading or negative watch? Does it hurt more or less, depending on the issuers original rating, the currency of the issue, or the economic activity of the issuer? Thanks to an alternative methodology, not relying on CARs but on Perron's structural break test, this article aims to highlight the effect of the rating actions of the three main agencies (Moody's, Standard and Poor's, and Fitch Ratings) on European bond markets. A logit model is used to sort out the variables influencing the probability of reaction to a rating action. The authors then measure the magnitude of the reaction according to the significant variables. And they find, in many cases, it does not hurt at all!