Economic policy uncertainty and sovereign credit rating decisions: Panel quantile evidence for the Eurozone

Boumparis, Periklis; Milas, Costas; Panagiotidis, Theodore

doi:10.1016/j.jimonfin.2017.08.007

Cited by 57 publications

(45 citation statements)

References 22 publications

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“…In our opinion, this sounds reasonable due to the prolonged reaction of credit rating agencies nearly before the world crisis and their wrong evaluating of companies (banks) and instrument ratings. Even more, some authors argued that credit rating agencies default in prediction of corporates defaults in 2008 (Baghai et al, 2014;Ryan, 2012) or accelerated sovereign debt crisis in European Union in 2009-2010 or they question subjectivity in their assessment methods (Boumparis et al, 2017(Boumparis et al, , 2019De Moor et al, 2018). However, there is another problem with this issue.…”

Section: A Methodological Review Of Rating Assessmentmentioning

confidence: 99%

Assessing methodology of banks' ratings and their competitive positions: overview of main rating agencies

Grigorieva

Михайловна²,

Vuković

et al. 2020

Vestn. Ross. univ. družby nar., Ser. Èkon.

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This paper analyzes methodologies of credit rating assessment of major rating agencies, with the focus on Fitch Ratings (Fitch). The methodology data were collected from Fitch Ratings. Also, the article review international literacy for factors and indicators adequacy in rating assessments. The purpose of this research is to overview literacy for the primary methodologies of banks' credit rating assessment. It was explained that ratios from financial indicators are most important for credit rating assessment. In some cases, in sovereign countries, support and macroeconomic factors are significant. We concluded that this area is still not enough researched and that in the future, the number of studies will appear with different methodological proposals and improvements.

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Section: A Methodological Review Of Rating Assessmentmentioning

confidence: 99%

Assessing methodology of banks' ratings and their competitive positions: overview of main rating agencies

Grigorieva

Михайловна²,

Vuković

et al. 2020

Vestn. Ross. univ. družby nar., Ser. Èkon.

View full text Add to dashboard Cite

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“…Moreover, economic uncertainty affects this relationship. Boumparis et al (2017) stated that in the context of the European debt crisis, an increase in economic uncertainty leads to an increase in bond yields. Therefore, in the presence of great uncertainty, risk-averse investors are more prone to invest in short-term debt (Broner et al 2013), since they face more uncertainty when lending long-term (Perez 2017).…”

Section: Relation Between Sovereign Risk and Debt Maturity Structurementioning

confidence: 99%

“…This economic shock created a context of political and economic uncertainty, leading to multiple challenges for policymakers and affecting financing costs and investment decisions (Baker et al 2016;Davis 2016). Economic uncertainty also negatively affects sovereign risk, especially in peripheral countries (Boumparis et al 2017). Within this context of crisis and economic uncertainty, the objective of this paper is to analyze the impact of sovereign risk on the maturity structure of sovereign debt for a group of Economic and Monetary Union (EMU) countries.…”

Section: Introductionmentioning

confidence: 99%

Bond Yields, Sovereign Risk and Maturity Structure

González-Fernández¹,

González-Velasco²

2018

Risks

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The aim of this paper is to analyze the relation between maturity structure, sovereign bond yields and sovereign risk in the Economic and Monetary Union for the period of 1990-2013. The results confirm the existence of an inverse relationship between sovereign bond yields, sovereign risk and the maturity structure of sovereign debt, regardless of the proxy that is used to measure sovereign risk and the time variance of the variables employed. The results indicate that risk shortens the maturity structure of sovereign debt because it reduces the stock of long-term debt. The relationship between maturity structure and sovereign bond yields differs depending on the risk of the countries analyzed (non-monotonic relationship) and the differences between peripheral and core countries are greater for higher levels of the yields. If we control for the indebtedness level of these countries, the results show that the relationship between the sovereign bond yields and maturity strengthens as the debt level increases.Risks 2018, 6, 109 2 of 25 maturity structure and credit risk has been analyzed in depth in the field of corporate finance, for instance in the works of Myers (1977), Flannery (1986 and Diamond (1991) and, more recently, in those of Baker et al. (2003) and Brunnermeier and Oehmke (2013), among others. However, there are fewer studies in the field of public finance in which the relationship between maturity and sovereign risk is analyzed, as public finance studies have paid more attention to other research topics, such as debt levels and risk premiums. Moreover, maturity structure is a fundamental tool in managing sovereign debt (Goudswaard 1990). Therefore, this paper attempts to extend the existing literature on this line of research, which is particularly interesting in the context of the current financial crisis.The results showed that sovereign bond yields, sovereign risk and the maturity structure of sovereign debt are inversely related. This finding indicates that an increase in the risk level shortens the maturity structure for the sample. Furthermore, the analysis of the debt maturity structure suggests it is reduced when the sovereign risk increases as the proportion of long-term debt reduces. Another interesting result was the existence of a non-monotonic relationship between sovereign bond yields and the maturity structure debt. We found evidence that in high risk countries (i.e., peripheral countries), the maturity structure of the debt shortens because of the increase in sovereign bond yields. However, in countries with lower risk (i.e., core countries 1 ), this inverse relationship is not as clear. If sovereign bond yields increase, the yields of long-term bonds from countries with higher sovereign risk (i.e., peripheral countries) increase to a greater extent than those of short-term bonds, i.e., the increase in the sovereign bond yields increases the term premium. Therefore, these countries resort to issuing short-term debt to reduce their funding costs. However, the yields of long-term governmen...

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“…For instance, when there is uncertainty surrounding European economic policy, Greece (a lower rated country) is expected to get a major credit "hit" from rating agencies. This case is evident during the period of 2008-2013, when Greece was continuously downgraded on the rise of policy uncertainty (Boumparis et al 2017). The United Kingdom enjoys a strong triple "A" rating for the past 35 years.…”

Section: Introduction and Literature Reviewmentioning

confidence: 99%

Performance of Exchange Traded Funds during the Brexit Referendum: An Event Study

Alkhatib

Harasheh

2018

IJFS

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In today's interrelated economies, financial information travel at speed of light to reach investors around the globe. Global financial markets experience regular shocks that transmit negative waves to other equity markets and different asset classes. Given the unique characteristics of exchange-traded funds (ETFs), this paper examines how different ETFs that are traded on London Financial center reacted to the Brexit event in 23 June 2016. The unexpected referendum result the day after is viewed as the next significant financial event since 2008. The paper employs an event study market model on daily and abnormal returns of the selected ETFs with respect to FTSE 250 around the event date. Contrary to what is expected, the world equities fund experienced significant positive abnormal return on the event day. Emerging markets again proved to be a preferred investment destination in times of financial turmoil; the emerging equities fund gained 3% while enjoying an 11.5% positive significant abnormal returns. The US T-Bond fund recorded a 9% return with a significant 7.2% abnormal return. The gold fund soared as much as 4% as investors seeks refuge from Brexit, and the oil fund retraced 1% amid concerns of slowing global demand.

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Economic policy uncertainty and sovereign credit rating decisions: Panel quantile evidence for the Eurozone

Cited by 57 publications

References 22 publications

Assessing methodology of banks' ratings and their competitive positions: overview of main rating agencies

Assessing methodology of banks' ratings and their competitive positions: overview of main rating agencies

Bond Yields, Sovereign Risk and Maturity Structure

Performance of Exchange Traded Funds during the Brexit Referendum: An Event Study

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