Sovereign rating actions and the implied volatility of stock index options

Tran, Vu; Alsakka, Rasha; Gwilym, Owain ap

doi:10.1016/j.irfa.2014.05.010

Cited by 9 publications

(3 citation statements)

References 42 publications

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“…Beber and Brandt, ). Tran et al () illustrate that additional rating news (even negative rating news) could play a ‘confirmation’ role and reduce market volatility. In other words, share price volatility reduces in response to S&P downgrades, which was not revealed prior to the regulatory regime changes.…”

Section: Resultsmentioning

confidence: 99%

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Market Impact under a New Regulatory Regime: Credit Rating Agencies in Europe

et al. 2015

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We investigate whether there are any identifiable differences in market perceptions of rating news released by Moody's, S&P and Fitch following the establishment of a new regulatory regime in July 2011, when the European Securities and Markets Authority assumed responsibility for rating agencies' regulation in Europe. We focus the analysis on the impact of bank rating actions on stock returns and volatility during 2008–2013. Among the intended effects of the new regulatory regime are higher rating quality and enhanced market stability, yet we find very mixed evidence. Many differentials in market responses across CRAs are identified, which mean that a consistent effect of the new regulatory regime is not discernible.

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Section: Resultsmentioning

confidence: 99%

“…This mitigates rating clustering and market noise (e.g. Ferreira and Gama, ; Tran et al , ). It is noteworthy that the sample consists of observations on non‐consecutive days that may be very distant from each other.…”

Section: Methodsmentioning

confidence: 99%

Market Impact under a New Regulatory Regime: Credit Rating Agencies in Europe

et al. 2015

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“…A large literature exists on the spill-over of sovereign ratings across multiple dimensions and we explain in this section how our study fits into this wider literature. For an alternative discussion of the spill-over of sovereign credit risk along a number of dimensions see Tran, Alsakka and Ap Gwilym (2014).…”

Section: Literature and Hypothesesmentioning

confidence: 99%

New evidence on sovereign to corporate credit rating spill-overs

Hill

Bissoondoyal‐Bheenick

Faff

2018

International Review of Financial Analysis

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We explore what happens to domestic firm-level ratings around the time of a sovereign-rating action on a day-by-day and country-by-country basis. Our granular approach provides banks and investors with a fuller picture of their sovereign credit risk exposure and, as such, our analysis might feed into banks' internal modelling of their credit risk exposure for the purpose of determining regulatory capital, introduced under Basel II. We also provide a novel analysis of any bias in spill-over and we show that, inter alia, the tendency for greater spill-over of negative sovereign-rating actions can largely be accounted for by firm-and sovereign-level factors. However, even after allowing for these factors, some countries suffer from negative bias. The implied higher correlation between sovereign and firm-level ratings in times when countries are in crisis versus when they are in recovery may contribute to quicker and/or deeper crises versus slower and/or longer recoveries.

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Sovereign Credit Ratings: A Friend or Foe to Financial Development of African Countries?

Arogundade,

Mduduzi,

Naanwaab

2024

Int. J Fin Econ

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This study examined the impact of sovereign credit rating on financial development. Using a sample of 21 African countries from 1995 to 2019, the empirical result indicates a significant and positive link between sovereign credit rating and financial development that is, higher credit ratings are associated with lower borrowing costs, increased access to capital, and increased investor confidence. The study further finds that (1) sovereign credit ratings improve the financial institutions and markets of the selected countries; (2) the magnitude of the impact of credit rating on financial development is greater for countries with very high financial development; and (3) there is bidirectional causality between credit rating and financial development. The empirical results are remarkably robust to different measures of sovereign credit rating (Fitch and S&P), local currency debt ratings, sub‐categories of financial development (financial market and institution), and various estimators such as the two‐step system GMM, JKS Granger non‐causality, and the Machado and Silva quantile regression. In order to improve the financial depth and access funding from local and international markets to finance the sustainable development goals and Agenda 2063, the study recommends that African countries implement the necessary policies to obtain better ratings.

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Sovereign rating actions and the implied volatility of stock index options

Cited by 9 publications

References 42 publications

Market Impact under a New Regulatory Regime: Credit Rating Agencies in Europe

Market Impact under a New Regulatory Regime: Credit Rating Agencies in Europe

New evidence on sovereign to corporate credit rating spill-overs

Sovereign Credit Ratings: A Friend or Foe to Financial Development of African Countries?

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