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Using a Bootstrap Approach to Rate the Raters

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  • André Güttler

Abstract

This paper compares the accuracy of credit ratings of Moody's and Standard and Poor's. Based on 11,428 issuer ratings and 350 defaults in several datasets from 1999 to 2003 a slight advantage for the rating system of Moody's is detected. Compared to former research, the robustness of the results is increased by using nonparametric bootstrap approaches. Furthermore, robustness checks are made to control for the impact of watchlist entries, staleness of ratings, and the effect of unsolicited ratings on the results. Copyright Swiss Society for Financial Market Research 2005

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  • André Güttler, 2005. "Using a Bootstrap Approach to Rate the Raters," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 19(3), pages 277-295, October.
  • Handle: RePEc:kap:fmktpm:v:19:y:2005:i:3:p:277-295
    DOI: 10.1007/s11408-005-4693-1
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    1. repec:bla:jfinan:v:53:y:1998:i:4:p:1389-1413 is not listed on IDEAS
    2. Marshall E. Blume & Felix Lim & A. Craig MacKinlay, "undated". "The Declining Credit Quality of US Corporate Debt: Myth or Reality?," Rodney L. White Center for Financial Research Working Papers 03-98, Wharton School Rodney L. White Center for Financial Research.
    3. Cantor, Richard, 2001. "Moody's investors service response to the consultative paper issued by the Basel Committee on Bank Supervision "A new capital adequacy framework"," Journal of Banking & Finance, Elsevier, vol. 25(1), pages 171-185, January.
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    7. Poon, Winnie P. H., 2003. "Are unsolicited credit ratings biased downward?," Journal of Banking & Finance, Elsevier, vol. 27(4), pages 593-614, April.
    8. Cantor, Richard & Packer, Frank, 1997. "Differences of opinion and selection bias in the credit rating industry," Journal of Banking & Finance, Elsevier, vol. 21(10), pages 1395-1417, October.
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    Cited by:

    1. Duan, Jin-Chuan & Van Laere, Elisabeth, 2012. "A public good approach to credit ratings – From concept to reality," Journal of Banking & Finance, Elsevier, vol. 36(12), pages 3239-3247.
    2. Guttler, Andre & Wahrenburg, Mark, 2007. "The adjustment of credit ratings in advance of defaults," Journal of Banking & Finance, Elsevier, vol. 31(3), pages 751-767, March.
    3. Hauck, Achim & Neyer, Ulrike, 2014. "Disagreement between rating agencies and bond opacity: A theoretical perspective," Economics Letters, Elsevier, vol. 123(1), pages 82-85.

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