IDEAS home Printed from https://ideas.repec.org/p/tor/tecipa/tecipa-569.html
   My bibliography  Save this paper

Peer Effects in Credit Ratings

Author

Listed:
  • Jingzhi Huang
  • Yao Luo
  • Ruoyu Shao
  • Haiqing Xu

Abstract

The recent financial crisis has brought renewed attention to the failure of the credit rating mechanism and the strategic nature of credit ratings. In this paper, we conduct a structural analysis of strategic credit rating behavior in the Commercial Mortgage-Backed Security (CMBS) market, using a model of CMBS credit ratings where every rating agency's ratings reflect peer effects from other rating agencies. We establish semiparametric identification of the model by exploiting an exogenous equilibrium shift due to the financial crisis and incorporate the peer effects through the estimation of market "beliefs" on the ratings. Our estimation of the model using Bloomberg data on CMBS deals suggests that there is strong evidence of positive peer effects in ratings. We also find that including peer effects improves the fitness of our model of credit ratings.

Suggested Citation

  • Jingzhi Huang & Yao Luo & Ruoyu Shao & Haiqing Xu, 2016. "Peer Effects in Credit Ratings," Working Papers tecipa-569, University of Toronto, Department of Economics.
    • Handle: RePEc:tor:tecipa:tecipa-569
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:tor:tecipa:tecipa-569. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: RePEc Maintainer (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.