The information content of three credit ratings: the case of European residential mortgage-backed securities

Frank Fabozzi () and Dennis Vink

The European Journal of Finance, 2015, vol. 21, issue 3, 172-194

Abstract: We assess the information content of three credit ratings for tranches of newly issued European residential mortgage-backed securities. We find that tranches rated by three credit rating agencies where the rating by Standard & Poor's (S&P's) Ratings Service or Fitch is inferior to Moody's lead to higher funding costs and reflects what we refer to as rating risk. Our results suggest that market participants do not view credit ratings by Fitch and S&P's as redundant despite the fact that both employ the same rating approach.

Date: 2015
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DOI: 10.1080/1351847X.2013.862838

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