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A Note on the Information Content of Standard & Poor's Common Stock Ranking Changes

Financial Management, 1992, Vol. 21, No. 2, pp. 9-10.

6 Pages Posted: 20 Feb 2013  

James Felton

Central Michigan University - Department of Finance and Law

Pu Liu

University of Arkansas - Sam M. Walton College of Business

Douglas Hearth

University of Arkansas - Department of Finance

Date Written: August 1, 1991

Abstract

This study examines the information content of Standard & Poor's common stock ranking changes. Since prior studies find Standard & Poor's common stock rankings provide investors with a measure of risk, a ranking change may signify a change in risk. Common stock ranking changes made by Standard & Poor's may provide investors with a low-cost means of predicting the direction of future market risk. Internal memoranda containing ranking changes from June 1985 through May 1987 were obtained directly from Standard & Poor's. Using a sample of 191 upgrades and 582 downgrades, results indicate that mean portfolio betas change following Standard & Poor's memorandum dates for ranking changes.

Keywords: Standard & Poor's, Stock Guide, common stock rankings, market risk

JEL Classification: G12, G14

Suggested Citation

Felton, James and Liu, Pu and Hearth, Douglas, A Note on the Information Content of Standard & Poor's Common Stock Ranking Changes (August 1, 1991). Financial Management, 1992, Vol. 21, No. 2, pp. 9-10.. Available at SSRN: https://ssrn.com/abstract=2220847

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)

Pu Liu

University of Arkansas - Sam M. Walton College of Business ( email )

Department of Finance
Fayetteville, AR 72701
United States

Douglas Hearth

University of Arkansas - Department of Finance ( email )

Fayetteville, AR 72701
United States
501-575-2044 (Phone)

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