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The price impact of rating announcements: which announcements matter?

Author

Listed:
  • Marian Micu

    (Barclays - San Francisco, Ca Office)

  • Eli M Remolona
  • Philip D. Wooldridge

Abstract

Credit rating agencies make multiple announcements, some of which are intended to reflect the latest information available about a firm and others of which are intended to provide a stable signal of credit quality. Using data on CDS spreads, we examine which of these different types of rating announcements contains pricingrelevant information. We find that all types, including changes in outlook, have a significant impact on CDS spreads. Even rating announcements preceded by similar announcements have an impact. The price impact is greatest for firms with split ratings, smallcap firms and firms rated near the threshold of investment grade.

Suggested Citation

  • Marian Micu & Eli M Remolona & Philip D. Wooldridge, 2006. "The price impact of rating announcements: which announcements matter?," BIS Working Papers 207, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:207
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    credit default swaps; credit ratings; event study; market reaction;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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