Abstract

http://ssrn.com/abstract=1973556
 
 

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The Adverse Effects of Systematic Leakage Ahead of Official Sovereign Debt Rating Announcements


Alexander Michaelides


Imperial College Business School; University of Cyprus - Department of Public and Business Administration; Centre for Economic Policy Research (CEPR)

Andreas Milidonis


University of Cyprus - Department of Public & Business Administration; Nanyang Technological University (NTU) - Division of Banking & Finance

George Nishiotis


University of Cyprus - Department of Public and Business Administration

Panayiotis Papakyriacou


University of Cyprus - Department of Public and Business Administration

February 4, 2014


Abstract:     
Using event studies we find statistically and economically significant, negative daily abnormal stock market returns prior to sovereign debt rating downgrade announcements. Instrumental variable techniques show that these findings are more pronounced in countries with lower institutional quality. Our analysis of the frequency and content of news shows that results cannot be explained away by unrelated, concurrent bad news. Instead, we find support for the explanation of leakage, which could take the form of leaked private information to a group of investors, but could also take the form of a rumor that eventually appears in the public domain.

Number of Pages in PDF File: 61

Keywords: sovereign ratings, event studies, institutional quality, information leakage, TRMI.

JEL Classification: G14, G15, G24

working papers series


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Date posted: December 17, 2011 ; Last revised: February 4, 2014

Suggested Citation

Michaelides, Alexander and Milidonis, Andreas and Nishiotis, George and Papakyriacou, Panayiotis, The Adverse Effects of Systematic Leakage Ahead of Official Sovereign Debt Rating Announcements (February 4, 2014). Available at SSRN: http://ssrn.com/abstract=1973556 or http://dx.doi.org/10.2139/ssrn.1973556

Contact Information

Alexander Michaelides
Imperial College Business School ( email )
South Kensington Campus
Exhibition Road
London SW7 2AZ, DC SW7 2AZ
United Kingdom
University of Cyprus - Department of Public and Business Administration ( email )
75 Kallipoleos Street
P.O. Box 20537
Nicosia CY-1678
CYPRUS
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Andreas Milidonis (Contact Author)
University of Cyprus - Department of Public & Business Administration ( email )
P.O. Box 20537
Nicosia CY-1678
Cyprus
+357 22 893 626 (Phone)
HOME PAGE: http://www.ucy.ac.cy/~amilidon/
Nanyang Technological University (NTU) - Division of Banking & Finance ( email )
S3-B1B-76 Nanyang Avenue
Singapore, 639798
Singapore
George P. Nishiotis
University of Cyprus - Department of Public and Business Administration ( email )
75 Kallipoleos Street
P.O. Box 20537
Nicosia CY-1678
Cyprus
357 22893617 (Phone)
357 22892460 (Fax)
Panayiotis Papakyriacou
University of Cyprus - Department of Public and Business Administration ( email )
75 Kallipoleos Street
P.O. Box 20537
Nicosia CY-1678
CYPRUS
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