Are All Ratings Created Equal? The Impact of Issuer Size on the Pricing of Mortgage-Backed Securities

Jie He, Jun Qian and Philip E. Strahan
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Jie He: University of GA
Jun Qian: Boston College
Philip E. Strahan: Boston College

Working Papers from University of Pennsylvania, Wharton School, Weiss Center

Abstract: Initial yields on both AAA-rated and non-AAA rated mortgage-backed security (MBS) tranches sold by large issuers are higher than yields on similar tranches sold by small issuers during the market boom years of 2004-2006. Moreover, the prices of MBS sold by large issuers drop more than those sold by small issuers, and the differences are concentrated among tranches issued during 2004-2006. These patterns suggest that investors priced the risk that large issuers received more inflated ratings than small issuers, especially during booming periods.

JEL-codes: G10 G20 L10 (search for similar items in EconPapers)
Date: 2011-10
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Citations: View citations in EconPapers (1)

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