Credit ratings hit prices 'significantly' more in times of crisis, paper finds
The effects of rating actions on market prices are not crucial during favourable market conditions but become very significant in periods of crisis, according to a working paper published by the European Central Bank.
Market pricing of credit rating signals by Magdalena Grothe examines the relation between spreads and ratings for a "very large and comprehensive sample of corporate bonds", covering the developments in ratings and prices of over 16.5 thousand bonds over 12 years.
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