Sovereign Credit Ratings and Financial Markets Linkages: Application to European Data
By António Afonso, Davide Furceri, Pedro Gomes. Social Science Research Network, 2012
459 citations recorded by the source corpus.
We use EU sovereign bond yield and CDS spreads daily data to carry out an event study analysis on the reaction of government yield spreads before and after announcements from rating agencies (Standard & Poor’s, Moody’s, Fitch). Our results show: significant responses of government bond yield spreads to changes in rating notations and outlook, particularly in the case of negative announcements; announcements are not anticipated at 1-2 months horizon but there is bi-directional causality between ratings and spreads within 1-2 weeks; spillover effects especially from lower rated countries to higher rated countries; and persistence effects for recently downgraded countries.
Subfields: Finance
View Paper: https://www.semanticscholar.org/paper/63e8e226d6451f8f48ed2b39654959eac3cc599e
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In Finance
- Alexandros Kontonikas
- António Afonso
- M. Arghyrou
- Sarah Qian Wang
- Patrick Augustin
- Marti G. Subrahmanyam
- D. Tang
Citations in the corpus
- The Determinants of Sovereign Bond Yield Spreads in the EMU (2012, methodology): “Following existing literature (see e.g. Gande and Parsley, 2005; Afonso et al. 2012), we transform sovereign credit rating scores into the linear scale presented in Table A2 in the Appendix.11 A worse sovereign credit rating should be perceived by the markets as implying higher credit risk,…”
- Credit Default Swaps: A Survey (2014, background): “32 Afonso et al. [2012] complement the evidence in Ismailescu and Kazemi [2010] for 24 developed economies from the E.”