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The Response of Bond Prices to Insurer Ratings Changes

Author

Listed:
  • Hong Miao

    (Department of Finance and Real Estate, Colorado State University)

  • Sanjay Ramchander

    (Department of Finance and Real Estate, Colorado State University)

  • Tianyang Wang

    (Department of Finance and Real Estate, Colorado State University)

Abstract

This paper examines the impact of insurer ratings changes on bond prices. Using insurer ratings from four major rating agencies and data covering the recent financial crisis period, we document that downgrades have a strong negative price impact on bond prices, especially when the downgrades are reinforced by multiple agencies. In contrast, the announcement-day impact of upgrades is found to be weak. Our evidence is consistent with the predictions of structural credit risk models.

Suggested Citation

  • Hong Miao & Sanjay Ramchander & Tianyang Wang, 2014. "The Response of Bond Prices to Insurer Ratings Changes," The Geneva Papers on Risk and Insurance - Issues and Practice, Palgrave Macmillan;The Geneva Association, vol. 39(2), pages 389-413, April.
    • Handle: RePEc:pal:gpprii:v:39:y:2014:i:2:p:389-413
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    Cited by:

    1. Krishna Reddy & Rudi Bosman & Nawazish Mirza, 2019. "Impact Of Credit Ratings On Stock Returns," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 21(3), pages 1-24, January.

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