Article Title

IMPACT OF CREDIT RATINGS ON STOCK RETURNS

Authors

Krishna Reddy, Toi Ohomai Institute of Technology - New ZealandFollow
Rudi Bosman, Waikato Institute of Technology - New ZealandFollow
Nawazish Mirza, La Rochelle Business School - FranceFollow

Document Type

Article

Abstract

This study investigates whether a change in credit ratings lead to a change in dailyexcess stock returns. The sample includes daily stock price data for US firms listedon the Standard & Poor’s 500 from January 2006 to December 2015. Firms’ excessstock returns are compared with the market in a 14-day window around credit ratingdowngrades and upgrades. Our results are asymmetric, that is, there is a significantreaction to credit ratings downgrades but not to upgrades. In addition, we report weakevidence of upgrades in credit ratings since the 2008 global credit crisis leading tosignificant changes in security prices.

Recommended Citation

Reddy, Krishna; Bosman, Rudi; and Mirza, Nawazish (2019) "IMPACT OF CREDIT RATINGS ON STOCK RETURNS," Bulletin of Monetary Economics and Banking: Vol. 21: No. 3, Article 7.
DOI: https://doi.org/10.21098/bemp.v21i3.986
Available at: https://bulletin.bmeb-bi.org/bmeb/vol21/iss3/7

First Page

343

Last Page

366