The Information Content of Three Credit Ratings: The Case of European Residential Mortgage-Backed Securities

The European Journal of Finance, Vol. 21, Issue 3, pp. 172-194, 2015.

Posted: 17 Jul 2014 Last revised: 23 May 2015

See all articles by Dennis Vink

Dennis Vink

Nyenrode Business University

Frank J. Fabozzi

EDHEC Business School

Date Written: December 19, 2013

Abstract

We assess the information content of three credit ratings for tranches of newly issued European residential mortgage-backed securities. We find that tranches rated by three credit rating agencies where the rating by Standard & Poor’s (S&P’s) Ratings Service or Fitch is inferior to Moody’s lead to higher funding costs and reflects what we refer to as rating risk. Our results suggest that market participants do not view credit ratings by Fitch and S&P’s as redundant despite the fact that both employ the same rating approach.

Keywords: residential mortgage-backed securities, credit rating; credit rating agency

JEL Classification: G12; G14; G24

Suggested Citation

Vink, Dennis and Fabozzi, Frank J., The Information Content of Three Credit Ratings: The Case of European Residential Mortgage-Backed Securities (December 19, 2013). The European Journal of Finance, Vol. 21, Issue 3, pp. 172-194, 2015., Available at SSRN: https://ssrn.com/abstract=2447389

Dennis Vink

Nyenrode Business University ( email )

Straatweg 25
P.O. Box 130
Breukelen, 3620 AC
Netherlands

HOME PAGE: http://www.dennisvink.nl

Frank J. Fabozzi (Contact Author)

EDHEC Business School ( email )

France
215 598-8924 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
386
PlumX Metrics