Abstract

http://ssrn.com/abstract=2222801
 


 



The Information Content of Security Analyses: Evidence from Standard & Poor's Common Stock Quality Ranking Changes


James Felton


Central Michigan University - Department of Finance and Law

Douglas Hearth


University of Arkansas - Department of Finance

Pu Liu


University of Arkansas - Sam M. Walton College of Business

September 1, 1994

Journal of Business Finance & Accounting, 1995, Vol. 22, No. 7 (October), 975-989

Abstract:     
This paper examines stock price reactions to changes in Standard & Poor’s common stock rankings. Using internal memoranda obtained directly from Standard & Poor’s, an event study methodology, and a sample of 191 upgrades and 582 downgrades, we find that the majority of stock price reactions occur prior to memorandum dates. A Wall Street Journal Index search reveals that Standard & Poor’s makes 97% of its ranking changes following earnings announcements. However, we find stock price reactions subsequent to ranking changes for four of six portfolios of upgrades and three of six portfolios of downgrades. These findings are not strong enough to suggest the existence of a ‘Standard & Poor’s Anomaly.’ Rather, we find further evidence in support of the post-earnings-announcement drift hypothesis.

Number of Pages in PDF File: 24

Keywords: Standard & Poor’s, common stock rankings, quality rankings, Stock Guide, post-earnings-announcement drift

JEL Classification: G12, G14

Accepted Paper Series


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Date posted: February 24, 2013  

Suggested Citation

Felton, James and Hearth, Douglas and Liu, Pu, The Information Content of Security Analyses: Evidence from Standard & Poor's Common Stock Quality Ranking Changes (September 1, 1994). Journal of Business Finance & Accounting, 1995, Vol. 22, No. 7 (October), 975-989. Available at SSRN: http://ssrn.com/abstract=2222801

Contact Information

James Felton (Contact Author)
Central Michigan University - Department of Finance and Law ( email )
332 Sloan Hall
Mount Pleasant, MI 48859
989-774-3269 (Phone)
989-774-6456 (Fax)
Douglas Hearth
University of Arkansas - Department of Finance ( email )
Fayetteville, AR 72701
United States
501-575-2044 (Phone)
Pu Liu
University of Arkansas - Sam M. Walton College of Business ( email )
Department of Finance
Fayetteville, AR 72701
United States
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