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.
Reddy, Krishna; Bosman, Rudi; and Mirza, Nawazish
"IMPACT OF CREDIT RATINGS ON STOCK RETURNS,"
Bulletin of Monetary Economics and Banking: Vol. 21:
3, Article 7.
Available at: https://bulletin.bmeb-bi.org/bmeb/vol21/iss3/7