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Using a Bootstrap Approach to Rate the Raters

Financial Markets and Portfolio Management, Vol. 19, No. 3, pp. 277-295

35 Pages Posted: 6 Jun 2005  

Andre Guettler

University of Ulm - Department of Mathematics and Economics; Halle Institute for Economic Research

Abstract

This paper compares the accuracy of credit ratings of Moody's and Standard&Poor's. Based on 11,428 issuer ratings and 350 defaults in several datasets from 1999 to 2003 a slight advantage for the rating system of Moody's is detected. Compared to former research the robustness of the results is increased by using nonparametric bootstrap approaches. Furthermore, robustness checks are made to control for the impact of Watchlist entries, staleness of ratings and the effect of unsolicited ratings on the results.

Keywords: Credit rating agencies, validation, bootstrap

JEL Classification: G15, G23

Suggested Citation

Guettler, Andre, Using a Bootstrap Approach to Rate the Raters. Financial Markets and Portfolio Management, Vol. 19, No. 3, pp. 277-295. Available at SSRN: https://ssrn.com/abstract=499185 or http://dx.doi.org/10.2139/ssrn.499185

Andre Guettler (Contact Author)

University of Ulm - Department of Mathematics and Economics ( email )

Helmholzstrasse
Ulm, D-89081
Germany

Halle Institute for Economic Research ( email )

P.O. Box 11 03 61
Kleine Maerkerstrasse 8
D-06017 Halle, 06108
Germany

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