Market Dynamics Associated with Credit Ratings: A Literature Review

González, Fernando; Haas, François; Persson, Mattias; Toledo, Liliana; Violi, Roberto; Wieland, Martin; Zins, Carmen

doi:10.2139/ssrn.752065

Cited by 21 publications

(8 citation statements)

References 28 publications

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“…This finding is broadly in line with the latest assessment by IMF staff, which uses a production function approach and suggests that Russia's growth potential may have increased to 6.25-6.5% 16. The results do not change qualitatively if a bandpass filter, using the Baxter-King approximation, is used instead.…”

supporting

confidence: 86%

“…Standard statistical filtering techniques suggest that Russia's potential growth rate could be 4-6% per annum, depending on the time-span taken into consideration. 15 The application of a conventional two-sided Hodrick-Prescott filter 16 to Russian GDP data since 1995 yields a smoothed trend series that exhibits a pronounced swing of trend growth from around -0.5% in 1996 to more than 6.5% in 2003, before levelling off slightly to around 6% in the first quarter of 2006 (see Chart 10). 17 The large changes in the trend growth rate mainly reflect the mechanical smoothing around the 1998 crisis.…”

Section: Time Series Considerationsmentioning

confidence: 99%

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Long-Term Growth Prospects for the Russian Economy

Beck,

Kamps,

Mileva

2007

SSRN Journal

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supporting

confidence: 86%

Section: Time Series Considerationsmentioning

confidence: 99%

Long-Term Growth Prospects for the Russian Economy

Beck,

Kamps,

Mileva

2007

SSRN Journal

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“…Rating upgrades do not have any significant effect on volatility, whereas the downgrades aggravate the bond volatility (Afonso et al , 2014). Sovereign rating holds an average correlation with interest rate spreads, and such observation is more evident for downgrades than for upgrades (Gonzalez et al , 2004). However, Kraussl (2000) observes that a steep downgrade does not necessarily intensify a financial crisis.…”

Section: Related Literaturementioning

confidence: 99%

Sovereign credit ratings and bond yield spreads in emerging markets

Nair

2019

JFEP

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Purpose This paper, using the model suggested by Cantor and Pecker (1996), aims to explore the relations between sovereign ratings and bond yield spreads in emerging markets. Design/methodology/approach The ordinary least square regression procedure administered on the most recent sovereign ratings of 46 countries demonstrates how the macroeconomic information embody in the sovereign rating scores predict their bond yield spreads relative to the yield on US Treasury bond. Findings The research finds that the assigned rating scores do not herald the complete elites of the macroeconomic conditions in emerging markets, and there is more incremental information in the publicly available macroeconomic variables, which is much useful in predicting bond yield spreads than that embedded into the sovereign ratings. Practical implications The outcomes of the research have strategic implications for global investors and policymakers. The use of credit rating scores along with the macroeconomic fundamentals in emerging economies produces better predictions than the benchmark predictions solely based on the rating scores suggested by the previous research. Originality/value This study is the first one to address the issues related to sovereign ratings and bond yield spread in developing and emerging markets using the most recent ratings during the period of the economic recoveries, following the global financial crisis of 2008.

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“…In other terms, from the point of view of long-term investors, sovereign inflationlinked bonds are true risk-free assets. 16 Furthermore, the introduction of one financial innovation may in turn facilitate other innovations which would help to complete financial markets. For example, following the introduction of US government inflation-linked bonds, the Chicago Board of Trade introduced futures and options referenced to these bonds (five and ten-year maturities).…”

Section: Portfolio Diversification and Market Completenessmentioning

confidence: 99%