Abstract

http://ssrn.com/abstract=1512732
 
 

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Are All Ratings Created Equal? The Impact of Issuer Size on the Pricing of Mortgage-Backed Securities


Jie He


University of Georgia - Department of Finance

Jun Qian


Shanghai Advanced Institute of Finance(SAIF), Shanghai Jiao Tong University; University of Pennsylvania - Wharton Financial Institutions Center; China Academy of Financial Research (CAFR)

Philip E. Strahan


Boston College - Department of Finance; National Bureau of Economic Research (NBER)

January 20, 2012

Journal of Finance, Vol. 67, No. 6, pp. 2097-2137, December 2012.

Abstract:     
Initial yields on both AAA-rated and non-AAA rated mortgage-backed security (MBS) tranches sold by large issuers are higher than yields on similar tranches sold by small issuers during the market boom years of 2004-2006. Moreover, the prices of MBS sold by large issuers drop more than those sold by small issuers, and the differences are concentrated among tranches issued during 2004-2006. These patterns suggest that investors priced the risk that large issuers received more inflated ratings than small issuers, especially during booming periods.

Number of Pages in PDF File: 53

Keywords: Credit ratings, mortgage-backed securities, tranche, conflict of interest, yield

JEL Classification: G2, G1, L1

Accepted Paper Series





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Date posted: November 25, 2009 ; Last revised: November 27, 2012

Suggested Citation

He, Jie and Qian, Jun and Strahan, Philip E., Are All Ratings Created Equal? The Impact of Issuer Size on the Pricing of Mortgage-Backed Securities (January 20, 2012). Journal of Finance, Vol. 67, No. 6, pp. 2097-2137, December 2012.. Available at SSRN: http://ssrn.com/abstract=1512732 or http://dx.doi.org/10.2139/ssrn.1512732

Contact Information

Jie He
University of Georgia - Department of Finance ( email )
424 Brooks Hall
Terry College of Business, University of Georgia
Athens, GA 30602-6253
United States
Jun Qian (Contact Author)
Shanghai Advanced Institute of Finance(SAIF), Shanghai Jiao Tong University ( email )
211 West Huaihai Road
Shanghai, 200030
China
86-21-62934520 (Phone)
86-21-62934572 (Fax)
HOME PAGE: http://www.saif.sjtu.edu.cn/en/professors/2101
University of Pennsylvania - Wharton Financial Institutions Center
2306 Steinberg Hall-Dietrich Hall
Philadelphia, PA 19104
United States
HOME PAGE: http://fic.wharton.upenn.edu/fic/
China Academy of Financial Research (CAFR)
1954 Huashan Road
Shanghai P.R.China, 200030
China

Philip E. Strahan
Boston College - Department of Finance ( email )
Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States
617-552-6430 (Phone)
617-552-0431 (Fax)
HOME PAGE: http://www2.bc.edu/~strahan
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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