I examine the effects of contemporaneous credit rating and watchlist announcements on the over-the-counter U.S. corporate bond market. I find significant negative daily abnormal returns (-2.91%) over a ten-day window associated with a downgrade announcement with negative watch. The effect is particularly strong over the two-day post-event window (-1.90%), while there is some weak evidence of market timing during the four days preceding a downgrade (-0.58%). Abnormal returns following upgrades with positive watch are weaker both in terms of statistical significance and magnitude. I also observe higher abnormal bond returns following downgrades with negative watch around rating-sensitive boundaries. These results suggest that bond abnormal returns could also be driven by regulation constraints, besides the information content of the ratings. Finally, a multivariate cross-sectional analysis on abnormal returns over the two-day window following downgrades shows that the negative watchlist state is a key determinant of bond market's response even when key control variables are included. / <p>Lic.-avh. Stockholm : Handelshögskolan, 2014</p>
| Identifer | oai:union.ndltd.org:UPSALLA1/oai:DiVA.org:hhs-2281 |
| Date | January 2014 |
| Creators | Crosta, Alberto |
| Publisher | Handelshögskolan i Stockholm, Institutionen för Finansiell ekonomi, Stockholm : Stockholm School of Economics |
| Source Sets | DiVA Archive at Upsalla University |
| Language | English |
| Detected Language | English |
| Type | Licentiate thesis, monograph, info:eu-repo/semantics/masterThesis, text |
| Format | application/pdf |
| Rights | info:eu-repo/semantics/openAccess |
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