EconPapers    
Economics at your fingertips  
 

Do bond credit ratings lead to excess comovement?

Louis Raffestin

Journal of Banking & Finance, 2017, vol. 85, issue C, 41-55

Abstract: We investigate whether non-fundamental comovement results from investors using credit ratings to group assets into different “styles”. We find that bonds that join a new rating class start comoving more with the bonds in this class, even when fundamental factors suggest otherwise. We show that this comovement effect varies according to the nature of the bond considered, and the modalities of the rating action. Downgrades have a larger impact than upgrades, and rating reviews matter as much as actual movements. Finally, rating changes between grades BBB and BB, which lead bonds to be reclassified as either “high-yield” or “investment grade” assets, seem to be of particular importance.

Keywords: Style investing; Bond ratings; Comovement (search for similar items in EconPapers)
JEL-codes: G11 G12 G14 G24 D83 F30 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426617301978
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Do bond credit ratings lead to excess comovement? (2017)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:85:y:2017:i:c:p:41-55

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Series data maintained by Dana Niculescu ().

 
Page updated 2018-01-23
Handle: RePEc:eee:jbfina:v:85:y:2017:i:c:p:41-55