Investment Grade, Asset Prices and Changes in the Source of Systematic Risk

Bruno Giovannetti and Mauro Rodrigues

No 2014_05, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: Global institutional investors face constraints, in the form of either external regulations or internal firm policies, with regard to investing in countries rated speculative grade. As a consequence, when a country receives (loses) its investment-grade status, a significant inflow (outflow) of foreign investment is likely to occur and, thus, a global portfolio should increase (diminish) in importance as a source of systematic risk for stocks traded in that country. We study how stock prices behave around such events. Our results are consistent with theory

Keywords: Investment grade; Systematic risk; Asset pricing (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
Date: 2014-04-23
New Economics Papers: this item is included in nep-rmg
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