Do upgrades matter? Evidence from trading volume

Jonathan Brogaard, Jennifer Koski and Andrew F. Siegel

Journal of Financial Markets, 2019, vol. 43, issue C, 54-77

Abstract: Prior researchers document no significant abnormal returns around upgrades of credit ratings, suggesting upgrades convey no new information. These studies are limited by lack of data, liquidity screens, and ambiguous predictions. We extend the literature using trading volume. Because trading volume is highly non-normally distributed (especially bond market volume), we derive a new, more powerful nonparametric test statistic that can be used in other applications. Abnormal volume is significant in the stock and bond markets around upgrades and downgrades. Some abnormal volume is attributable to credit ratings-based regulations. Controlling for other effects, we find evidence that upgrade announcements contain information.

Keywords: Credit ratings; Volume; Information; Nonparametric tests (search for similar items in EconPapers)
JEL-codes: C14 G12 G14 G24 G32 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:43:y:2019:i:c:p:54-77

DOI: 10.1016/j.finmar.2018.06.001

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