Do Credit Ratings Affect Spread and Return? A Study of Structured Finance Products (Digest Summary): F. Moreira and S. Zhao, International Journal of Finance & Economics, Vol. 23, No. 2 (April 2018): 205-217

Antony Jackson

Do Credit Ratings Affect Spread and Return? A Study of Structured Finance Products (Digest Summary): F. Moreira and S. Zhao, International Journal of Finance & Economics, Vol. 23, No. 2 (April 2018): 205-217

School of Computing Sciences

Research output: Contribution to specialist publication › Book/Film/Article review

Abstract

Using a structural equation modeling technique, the authors find causality from the ratings assigned by credit rating agencies to the credit spreads of asset-backed securities at issuance. The relationship is weaker in the secondary market, where investor attention quickly turns to the performance of stock and bond markets. These results suggest that regulators should focus their efforts on credit ratings at the time of the issuance.

Original language	English
Volume	48
No.	9
Specialist publication	CFA Digest
Publisher	CFA Institute
Publication status	Published - Sep 2018

Access to Document

https://www.cfainstitute.org/en/research/cfa-digest/2018/09/dig-v48-n9-1

Cite this

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abstract = "Using a structural equation modeling technique, the authors find causality from the ratings assigned by credit rating agencies to the credit spreads of asset-backed securities at issuance. The relationship is weaker in the secondary market, where investor attention quickly turns to the performance of stock and bond markets. These results suggest that regulators should focus their efforts on credit ratings at the time of the issuance. ",

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AB - Using a structural equation modeling technique, the authors find causality from the ratings assigned by credit rating agencies to the credit spreads of asset-backed securities at issuance. The relationship is weaker in the secondary market, where investor attention quickly turns to the performance of stock and bond markets. These results suggest that regulators should focus their efforts on credit ratings at the time of the issuance.

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