Abstract

http://ssrn.com/abstract=1856823
 
 

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Credit Ratings and Security Prices in the Subprime MBS Market


Adam B. Ashcraft


Federal Reserve Bank of New York

Paul S. Goldsmith-Pinkham


Harvard University

Peter Hull


Federal Reserve Banks - Federal Reserve Bank of New York

James I. Vickery


Federal Reserve Bank of New York

June 1, 2011

American Economic Review, Vol. 101, No. 3, pp. 115-119, 2011

Abstract:     
We present and discuss preliminary evidence suggesting that credit ratings significantly influenced prices for subprime mortgage-backed securities issued in the period leading up to the recent financial crisis. Ratings are closely correlated with prices even controlling for a rich set of security- and loan-level controls. This incremental variation in ratings has much less predictive power for security defaults, however, based on findings to date from our ongoing research, suggesting prices were excessively sensitive to ratings relative to their informational content.

Keywords: credit ratings, mortgage-backed securities

JEL Classification: G01, G21, G24

Accepted Paper Series


Not Available For Download

Date posted: June 3, 2011  

Suggested Citation

Ashcraft, Adam B. and Goldsmith-Pinkham, Paul S. and Hull, Peter and Vickery, James I., Credit Ratings and Security Prices in the Subprime MBS Market (June 1, 2011). American Economic Review, Vol. 101, No. 3, pp. 115-119, 2011. Available at SSRN: http://ssrn.com/abstract=1856823

Contact Information

Adam B. Ashcraft
Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045-0001
United States
212-720-1617 (Phone)
212-720-8363 (Fax)
Paul S. Goldsmith-Pinkham
Harvard University ( email )
1875 Cambridge Street
Cambridge, MA 02138
United States
Peter Hull
Federal Reserve Banks - Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045
United States
James Ian Vickery (Contact Author)
Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045
United States
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