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Credible Credit Raters?: An Analysis of Credit Rating Actions in the American Financial Markets

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Title: Credible Credit Raters?: An Analysis of Credit Rating Actions in the American Financial Markets
Author: Bostick, Andrew
Advisor: Ghosh, Indradeep
Department: Haverford College. Dept. of Economics
Type: Thesis (B.A.)
Issue Date: 2012
Abstract: To what extent do the credit rating agencies play a meaningful role in the American financial markets, and how has the 2008 Financial Crisis affected that role? To answer both of these questions, this study applies an Ordinary Least Squares regression analysis and an Abnormal Returns event study to a panel data set that contains the credit rating actions and asset returns (bond and stock) for a sample of fifty five corporations traded on the New York Stock Exchange from 2005 to 2011. The major findings are three-fold: credit rating agencies play a significant role in the bond market, as downgrades lead to large increases in bond spreads; the agencies’ role in the stock market is ambiguous; and, the Financial Crisis lead to a greater effect of downgrades on bond spreads. Though the paper’s framing premise is that the credit raters are not “credible”—given their recent mishandling of the mortgage-backed security industry—the findings suggest that raters’ actions actually take on more significance following the 2008 Financial Crisis.
Subject: Financial crises -- United States -- 21st century
Subject: Finance -- United States
Subject: Credit ratings -- United States
Terms of Use: http://creativecommons.org/licenses/by-nc/3.0/us/
Permanent URL: http://hdl.handle.net/10066/8150

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Citation

Bostick, Andrew. "Credible Credit Raters?: An Analysis of Credit Rating Actions in the American Financial Markets". 2012. Available electronically from http://hdl.handle.net/10066/8150.

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http://creativecommons.org/licenses/by-nc/3.0/us/ Except where otherwise noted, this item's license is described as http://creativecommons.org/licenses/by-nc/3.0/us/

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