PT  - JOURNAL ARTICLE
AU  - Jean-Noël Ory
AU  - Philippe Raimbourg
AU  - Antonio Salvi
TI  - Does It Really Hurt? <em>An Empirical Investigation of the</em>
               <br/>
               <em>Effects of Downgradings and Negative Watches on</em>
               <br/>
               <em>European Bond Spreads</em>
AID  - 10.3905/jfi.2011.20.3.086
DP  - 2010 Dec 31
TA  - The Journal of Fixed Income
PG  - 86--96
VI  - 20
IP  - 3
4099  - https://pm-research.com/content/20/3/86.short
4100  - https://pm-research.com/content/20/3/86.full
AB  - Who feels the most pain when credit rating agencies announce a downgrading or negative watch? Does it hurt more or less, depending on the issuer’s original rating, the currency of the issue, or the economic activity of the issuer? Thanks to an alternative methodology, not relying on CARs but on Perron’s structural break test, this article aims to highlight the effect of the rating actions of the three main agencies (Moody’s, Standard and Poor’s, and Fitch Ratings) on European bond markets. A logit model is used to sort out the variables influencing the probability of reaction to a rating action. The authors then measure the magnitude of the reaction according to the significant variables. And they find, in many cases, it does not hurt at all!TOPICS: Information providers/credit ratings, fixed-income portfolio management, developed markets [Europe], analysis of individual factors/risk premia