Credit Rating Announcements, Trading Activity and Yield Spreads:The Spanish Evidence

  1. Abad Romero, Pilar
  2. Díaz, Antonio
  3. Robles Fernández, María Dolores
Revista:
Documentos de Trabajo (ICAE)

ISSN: 2341-2356

Año de publicación: 2011

Número: 36

Páginas: 1-28

Tipo: Documento de Trabajo

DIALNET GOOGLE SCHOLAR lock_openDocta Complutense editor

Otras publicaciones en: Documentos de Trabajo (ICAE)

Resumen

We test whether or not different rating announcements contain pricing-relevant information and modify trading activity patterns in the Spanish commercial paper and corporate bond markets. We observe a statistically significant widening of yield spreads in both segments of the corporate debt market after reviews of downgrades and negative outlook reports. In addition, we find that certain rating announcements encourage trading activity even when the information is not pricing-relevant. The release of information arouses investor interest for the involved securities. Thus, trading frequency increases, although larger-sized transactions, which should denote possible portfolio rebalancing, are not observed. In the commercial paper note market, we also find that that trading volumes fade away after reviews for downgrade. Investors seem to prefer reducing the trading of these short-term securities to liquidating their positions.

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