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Leads and lags in sovereign credit ratings

Rasha Alsakka and Owain ap Gwilym

Journal of Banking & Finance, 2010, vol. 34, issue 11, 2614-2626

Abstract: This paper analyses lead-lag relationships in sovereign ratings across five agencies, and finds evidence of interdependence in rating actions. Upgrade (downgrade) probabilities are much higher, and downgrade (upgrade) probabilities are much lower for a sovereign issuer with a recent upgrade (downgrade) by another agency. S&P tends to demonstrate the least dependence on other agencies, and Moody's tends to be the first mover in upgrades. Rating actions by Japanese agencies tend to lag those of the larger agencies, although there is some evidence that they lead Moody's downgrades.

Keywords: Credit; rating; agencies; Sovereign; rating; Lead-lag; relationship; Ordered; probit; model; Marginal; effects (search for similar items in EconPapers)
Date: 2010
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