Comparative analysis of risk ratings for the East European region

Suhejla Hoti ()

Mathematics and Computers in Simulation (MATCOM), 2005, vol. 68, issue 5, 449-462

Abstract: Following the aftermath of the 11 September 2001 events, the risks associated with engaging in international dealings have increased substantially, and become more difficult to analyse and predict for decision makers in the economic, financial and political sectors. The importance of country risk analysis is underscored by the existence of several prominent country risk rating agencies, which combine a wide range of qualitative and quantitative information regarding alternative measures of economic, financial and political risk into associated composite risk ratings. However, the accuracy of any rating agency with regard to any or all of these measures is open to question. For this reason, the paper provides a qualitative comparison of country risk rating systems used by seven leading rating agencies. The paper also provides a novel analysis of four risk ratings using univariate and multivariate volatility models for nine East European countries. These ratings are compiled by the International Country Risk Guide, which is the only risk rating agency to provide consistent monthly data for a large number of countries since 1984. The empirical results enable a comparative assessment of the conditional means and volatilities associated with county risk returns, defined as the rate of change in country risk ratings, across the nine East European countries. Moreover, the estimated constant conditional correlation coefficients provide useful information as to whether the countries are similar in terms of shocks to the four risk returns.

Keywords: Country risk; Rating agencies; Rating systems; ICRG; Economic risk; Financial risk; Political risk; Composite risk; Volatility; Conditional correlation; Shocks; GARCH (search for similar items in EconPapers)
Date: 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378475405000455
Full text for ScienceDirect subscribers only

Related works:
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:matcom:v:68:y:2005:i:5:p:449-462

DOI: 10.1016/j.matcom.2005.02.014

Access Statistics for this article

Mathematics and Computers in Simulation (MATCOM) is currently edited by Robert Beauwens

More articles in Mathematics and Computers in Simulation (MATCOM) from Elsevier
Bibliographic data for series maintained by Catherine Liu ().