Risk and returns around bond rating changes: New evidence from the Spanish Stock Market

Pilar Abad Romero and M. Dolores Robles Fernandez
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Pilar Abad Romero: Universidad Complutense de Madrid, Dpto. de Economía Cuantica

Documentos de Trabajo del ICAE from Universidad Complutense de Madrid, Facultad de Ciencias Económicas y Empresariales, Instituto Complutense de Análisis Económico

Abstract: This study analyzes the effect of corporate bond rating changes over stock prices. We explore the effects over excess of returns and systematic risk. Rating changes by Moody´s, Standard and Poor´sor FitchIBCA are analyzed. On an efficient market, these changes will omly have some effect if they contain some new information or if they are associated to a redistribution of dummy approach. Our results indicate that rating downgrades do not cause abnormal returns around the date of the announcement while upgrades cause significantly negative effect.

Keywords: Credit rating agencies; Rating changes; Event study; Stock returns; Event study dummy approach; Systematic risk; SUR. (search for similar items in EconPapers)
JEL-codes: C34 G12 G14 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2005
New Economics Papers: this item is included in nep-fmk and nep-rmg
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https://eprints.ucm.es/id/eprint/7882/1/0505.pdf (application/pdf)

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Journal Article: Risk and Return Around Bond Rating Changes: New Evidence From the Spanish Stock Market (2006)
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