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Stock Market Reactions to Credit Ratings Across the Subprime Crisis

In: Entrepreneurship, Business and Economics - Vol. 2

Author

Listed:
  • Eleonora Isaia

    (University of Torino)

  • Marina Damilano

    (University of Torino)

  • Cristina Rovera

    (University of Torino)

Abstract

At the time of the subprime crisis, investors strongly blamed credit rating agencies (CRAs). Six years later, we want to verify if CRAs are still suffering a reputational damage by measuring stock prices reactions to rating announcements. To test our hypothesis we conduct an event analysis on the American, EU area and Asian/Pacific stock markets over a 10-year period from November 2003 to November 2013. We find that the post-crisis abnormal returns are in general lower if compared with the pre-crisis level, in particular if rating changes are far away from the speculative-junk border.

Suggested Citation

  • Eleonora Isaia & Marina Damilano & Cristina Rovera, 2016. "Stock Market Reactions to Credit Ratings Across the Subprime Crisis," Eurasian Studies in Business and Economics, in: Mehmet Huseyin Bilgin & Hakan Danis (ed.), Entrepreneurship, Business and Economics - Vol. 2, edition 1, pages 585-596, Springer.
    • Handle: RePEc:spr:eurchp:978-3-319-27573-4_37
    DOI: 10.1007/978-3-319-27573-4_37
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