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

Jie (Jack) He, Jun Qian and Philip E. Strahan

No 17238, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We examine whether rating agencies (Moody's, S&P, and Fitch) reward large issuers of mortgage-backed securities, who bring substantial business, by granting them unduly favorable ratings. The initial yield on both AAA-rated and non-AAA rated tranches sold by large issuers is higher than that 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. We conclude that large issuers receive more favorable ratings and that the market prices the risk of inflated ratings, especially during booming periods.

JEL-codes: G01 G2 (search for similar items in EconPapers)
Date: 2011-07
New Economics Papers: this item is included in nep-ban, nep-bec and nep-ure
Note: CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published as A RE ALL R ATINGS C REATED E QUAL ? T HE I MPACT OF I SSUER S IZE ON THE P RICING OF M ORTGAGE -B ACKED S ECURITIES , 2012, Journal of Finance 67(6), 2097-2138, with Jie He and Jun Qian.

Downloads: (external link)
http://www.nber.org/papers/w17238.pdf (application/pdf)

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:nbr:nberwo:17238

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w17238

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().