Moody's and S&P Ratings: Are They Equivalent? Conservative Ratings and Split Rated Bond Yields
Journal of Money, Credit and Banking, Forthcoming
43 Pages Posted: 12 Mar 2010
Date Written: March 9, 2010
Abstract
We examine the relative impact of Moody’s and S&P ratings on bond yields and find that at issuance yields on split rated bonds with superior Moody’s ratings are, on average, 8 basis points lower than yields on split rated bonds with superior S&P ratings. This pattern suggests that investors differentiate between the two ratings and assign more weight to the ratings from Moody’s, the more conservative rating agency. Moody's ratings become relatively more conservative after 1998 and the impact of a superior Moody's rating upon split rated bond yields is stronger. In addition, the differential impact of the two ratings on split rated bond yields is more pronounced for Rule 144A issues, which are more opaque.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Stock Market Reaction to Anticipated versus Surprise Rating Changes
-
Credit Ratings and the Standardized Approach to Credit Risk in Basel Ii
-
The Adjustment of Credit Ratings in Advance of Defaults
By Andre Guettler and Mark Wahrenburg
-
Credit Ratings and the Standardised Approach to Credit Risk in Basel Ii
-
When You Wish Upon a Star: Explaining the Cautious Growth of Royalty-Backed Securitization
-
A New Method to Value Intellectual Property
By Ted Hagelin
-
Multimarket Trading and the Cost of Debt: Evidence from Global Bonds
-
Resolving the Patent-Antitrust Paradox Through Tripartite Innovation