IMPACT OF CREDIT RATINGS ON STOCK RETURNS

Krishna Reddy (), Rudi Bosman and Nawazish Mirza
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Krishna Reddy: Toi Ohomai Institute of Technology
Rudi Bosman: Waikato Institute of Technology

Bulletin of Monetary Economics and Banking, 2019, vol. 21, issue 3, 343-366

Abstract: This study investigates whether a change in credit ratings lead to a change in daily excess stock returns. The sample includes daily stock price data for US firms listed on the Standard & Poor’s 500 from January 2006 to December 2015. Firms’ excess stock returns are compared with the market in a 14-day window around credit rating downgrades and upgrades. Our results are asymmetric, that is, there is a significant reaction to credit ratings downgrades but not to upgrades. In addition, we report weak evidence of upgrades in credit ratings since the 2008 global credit crisis leading to significant changes in security prices.

Keywords: Credit Ratings; Firms; Stock Returns; Global Financial Crisis (search for similar items in EconPapers)
JEL-codes: G01 G14 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:idn:journl:v:21:y:2019:i:3d:p:1-24

DOI: 10.21098/bemp.v21i3.986

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