Do Sovereign Credit Ratings Influence Regional Stock and Bond Market Interdependencies in Emerging Countries?

Rachel Christopher, Suk-Joong Kim () and Eliza Wu

Chapter 15 in Information Spillovers and Market Integration in International Finance:Empirical Analyses, 2018, pp 517-546 from World Scientific Publishing Co. Pte. Ltd.

Abstract: We investigate the permanent and transitory effects of sovereign credit ratings on time-varying stock and bond market correlations with their respective regional markets for a sample of up to nineteen emerging countries over the period from January 1, 1994 to July 1, 2007. We find that stock and bond market co-movements within a region respond heterogeneously to sovereign ratings information. Sovereign ratings and outlooks tend to be positively related to regional stock market co-movements suggesting that there are positive rating spillover effects whereby upgrades provide common benefits for neighboring countries in the region, however downgrades would lead to investors shifting funds from the downgraded market into the surrounding region. In contrast, sovereign rating and outlooks tend to be negatively related to regional bond market co-movements suggesting the existence of contagion during periods of ratings and outlook downgrades (negative rating spillover effects). We find the negative influence is concentrated in the countries that have higher foreign currency debt ratings than the regional average.

Keywords: Currency Intervention; Macroeconomic News; International Capital Flows; Sovereign Credit Rating (search for similar items in EconPapers)
JEL-codes: F30 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.worldscientific.com/doi/pdf/10.1142/9789813223585_0015 (application/pdf)
https://www.worldscientific.com/doi/abs/10.1142/9789813223585_0015 (text/html)
Ebook Access is available upon purchase.

Related works:
Journal Article: Do sovereign credit ratings influence regional stock and bond market interdependencies in emerging countries? (2012)
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:wsi:wschap:9789813223585_0015

Ordering information: This item can be ordered from

Access Statistics for this chapter

More chapters in World Scientific Book Chapters from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().