Variations in sovereign credit quality assessments across rating agencies |
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Authors: | Paula Hill Robert Brooks Robert Faff |
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Institution: | 1. University of Bristol, 8 Woodland Road, Bristol BS8 1TN, United Kingdom;2. UQ Business School, University of Queensland, 4072 Queensland, Australia;3. University of Leeds, The Maurice Keyworth Building, Leeds LS2 9JT, United Kingdom |
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Abstract: | We investigate agency variation in credit quality assessment (Standard and Poor’s vs. Moody’s vs. Fitch) employing sovereign ratings data for 129 countries, spanning the period 1990–2006. While we find that the credit rating agencies often disagree about credit quality, it is usually confined to one or two notches on the finer scale. We find that several variables have varying importance in explaining ratings across agencies which leads us to conclude that material heterogeneity exists between them. Also, while watch and outlook procedures are generally strong predictors of rating changes relative to other public data, additional significant variables suggest that it might be possible to augment these agency data to provide better forecasts of future rating changes. |
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Keywords: | C13 C14 G15 G24 |
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