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Multiple credit ratings and market heterogeneity

Author

Listed:
  • Vu Tran

    (School of Management, Swansea University)

  • Rasha Alsakka

    (Bangor Business School, Bangor University)

  • Owain ap Gwilym

    (Bangor Business School, Bangor University)

Abstract

We propose a model in which news from multiple credit rating agencies interacts with market heterogeneity. The model illustrates that the first messenger discloses new information while an additional messenger(s) plays an important role of coordinating heterogeneous beliefs. Empirical investigations based on sovereign credit ratings, foreign exchange and equity markets confirm that rating news coordinates investors’ beliefs. Rating news from both types of messenger(s) induces a significant impact on exchange rates and stock indices. Volatility measures increase in response to news from the first messenger while ex-post volatility reduces following news from an additional messenger

Suggested Citation

  • Vu Tran & Rasha Alsakka & Owain ap Gwilym, 2018. "Multiple credit ratings and market heterogeneity," Working Papers 2018-26, Swansea University, School of Management.
    • Handle: RePEc:swn:wpaper:2018-26
    as

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    File URL: https://rahwebdav.swan.ac.uk/repec/pdf/WP2018-26.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Credit ratings; Information content; Market heterogeneity; Price volatility;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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