Do rating agencies exhibit herding behaviour? Evidence from sovereign ratings
Chris Stewart () and
International Review of Financial Analysis, 2019, vol. 64, issue C, 57-70
We assess the presence of herding by considering the lead-lag relationship of sovereign ratings assigned by the three main rating agencies at the individual country level. Given that different rating agencies may have different levels of expertise (reputation) for different countries it is not obvious that the lead-lag relationship is homogeneous across countries. We therefore conduct poolability tests within this context to assess this assumption and find evidence of heterogeneity. This leads us to conduct country-by-country time-series tests to assess the lead-lag relationship among agencies. To our knowledge we are the first to do this and thereby extend the literature on herding among rating agencies' sovereign assignments. We also consider changes in the lead-lag relationship through time by splitting the sample into pre-crisis and crisis periods to assess the extent to which any herding is intentional and our results indicate some degree of heterogeneity through time. To the extent that there is herding we find that it is generally towards Standard and Poor's ratings confirming our expectations given that this agency is regarded as possessing the greatest reputational capital. However, our results do not support the expectation that Fitch is a follower for more (a leader for less) countries than Moody's.
Keywords: Sovereign ratings; Herding; Cross-country heterogeneity (search for similar items in EconPapers)
JEL-codes: C25 C52 G24 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:64:y:2019:i:c:p:57-70
Access Statistics for this article
International Review of Financial Analysis is currently edited by B.M. Lucey
More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Haili He ().