The Impact of Credit Rating Announcements on Corporates' Credit Default Swap Spreads - Are There Intra-Industry Effects Observable?

28 Pages Posted: 5 Nov 2012

See all articles by Hans-Peter Burghof

Hans-Peter Burghof

University of Hohenheim

Philipp Johannes Schneider

affiliation not provided to SSRN

Andreas Wengner

University of Hohenheim

Date Written: April 19, 2012

Abstract

This study examines the impact of credit rating announcements from the three leading credit rating agencies (Moody's, S&P, Fitch)on the Credit Default Swap Spreads of corporates and their spillover effects within industries. We find, that both downgrades and upgrades have an impact on the CDS Spreads and lead to spillover effects around the event date. The degree of the reaction depends on the industry which is affected by the rating as well as on the credit rating agency.

Our main finding is that CDS Spreads' market reaction is industry- and rating agency specific, which has important implications for the construction of portfolios with credit-sensitive instruments.

Keywords: Credit Default Swaps, Market Reaction, Spillover-E

JEL Classification: G11, G14, G15

Suggested Citation

Burghof, Hans-Peter and Schneider, Philipp Johannes and Wengner, Andreas, The Impact of Credit Rating Announcements on Corporates' Credit Default Swap Spreads - Are There Intra-Industry Effects Observable? (April 19, 2012). 29th International Conference of the French Finance Association (AFFI) 2012. Available at SSRN: https://ssrn.com/abstract=2084916 or http://dx.doi.org/10.2139/ssrn.2084916

Hans-Peter Burghof

University of Hohenheim ( email )

Schloss Hohenheim
510F
Stuttgart, 70599
Germany
+49 711 459 22900 (Phone)
+49 711 459 23448 (Fax)

Philipp Johannes Schneider

affiliation not provided to SSRN

Andreas Wengner (Contact Author)

University of Hohenheim ( email )

Fruwirthstr. 48
Stuttgart, 70599
Germany

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