Combining Bond Rating Forecasts Using Logit

Posted: 16 Aug 2001

See all articles by Mark J. Kamstra

Mark J. Kamstra

York University - Schulich School of Business

Peter E. Kennedy

Simon Fraser University (SFU) - Department of Economics

Teck-Kin Suan

Simon Fraser University (SFU) - Department of Economics

Abstract

Companies sometimes use statistical analysis to anticipate their bond ratings or a change in the rating. However, different statistical models can yield different ratings forecasts, and there is no clear rule for which model is preferable. We use several forecasting methods to predict bond ratings in the transportation and industrial sectors listed by Moody's bond rating service. A variant of the ordered-logit regression-combining method of Kamstra and Kennedy (1998) yields statistically significant, quantitatively meaningful improvements over its competitors, with very little computational cost.

Suggested Citation

Kamstra, Mark J. and Kennedy, Peter E. and Suan, Teck-Kin, Combining Bond Rating Forecasts Using Logit. Available at SSRN: https://ssrn.com/abstract=274396

Mark J. Kamstra (Contact Author)

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

Peter E. Kennedy

Simon Fraser University (SFU) - Department of Economics ( email )

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada
604-291-4516 (Phone)

Teck-Kin Suan

Simon Fraser University (SFU) - Department of Economics

8888 University Drive
Burnaby, British Columbia V5A 1S6
Canada

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