Do Sovereign Credit Rating Changes Have Spillover Effects on Other Countries?

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Abstract/Contents

Abstract: Rating agencies assign sovereign credit ratings to assess the riskiness of sovereign borrowers; these ratings change when the agencies feel that a country’s credit risk has changed significantly. This paper investigates whether the rating and outlook changes from 18 emerging markets affect domestic and foreign financial markets. I estimate several panel regressions to capture the immediate effects of rating announcements on sovereign spreads and stock prices. In addition, I conduct event studies to capture the behavior of stocks and bonds before and after the announcement. I find evidence that rating announcements do in fact affect both domestic and foreign markets. Rating announcement effects are strongest on both the country and asset being rated. Because rating changes are often anticipated, I also employ methods to account for the effects of market anticipation.

Type of resource	text
Date created	May 2010

Author	Flores, Estevan
Primary advisor	Harding, Matthew
Degree granting institution	Stanford University, Department of Economics

Subject	Stanford Department of Economics
Subject	Rating agencies
Subject	credit ratings
Subject	financial contagion
Subject	sovereign risk
Genre	Thesis

Location	https://purl.stanford.edu/cs518ft1880

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Preferred Citation: Flores, Estevan. (2010). Do Sovereign Credit Rating Changes Have Spillover Effects on Other Countries?. Stanford Digital Repository. Available at: https://purl.stanford.edu/cs518ft1880

Stanford University, Department of Economics, Honors Theses

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