Sovereign credit ratings, market volatility, and financial gains

Detalhes bibliográficos
Autor(a) principal: Afonso, António
Data de Publicação: 2014
Outros Autores: Gomes, Pedro, Taamouti, Abderrahim
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
Texto Completo: http://hdl.handle.net/10400.5/7422
Resumo: The reaction of EU bond and equity market volatilities to sovereign rating announcements (Standard & Poor’s, Moody’s, and Fitch) is investigated using a panel of daily stock market and sovereign bond returns. The parametric volatilities are filtered using EGARCH specifications. The estimation results show that upgrades do not have significant effects on volatility, but downgrades increase stock and bond market volatility. Contagion is present, with sovereign rating announcements creating interdependence among European financial markets with upgrades (downgrades) in one country leading to a decrease (increase) in volatility in other countries. The empirical results show also a financial gain and risk (value-at-risk) reduction for portfolio returns when taking into account sovereign credit ratings’ information for volatility modelling, with financial gains decreasing with higher risk aversion.
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spelling Sovereign credit ratings, market volatility, and financial gainsSovereign RatingsYieldsStock Market ReturnsVolatilityEGARCHOptimal PortfolioFinancial GainRisk ManagementValue-at-RiskThe reaction of EU bond and equity market volatilities to sovereign rating announcements (Standard & Poor’s, Moody’s, and Fitch) is investigated using a panel of daily stock market and sovereign bond returns. The parametric volatilities are filtered using EGARCH specifications. The estimation results show that upgrades do not have significant effects on volatility, but downgrades increase stock and bond market volatility. Contagion is present, with sovereign rating announcements creating interdependence among European financial markets with upgrades (downgrades) in one country leading to a decrease (increase) in volatility in other countries. The empirical results show also a financial gain and risk (value-at-risk) reduction for portfolio returns when taking into account sovereign credit ratings’ information for volatility modelling, with financial gains decreasing with higher risk aversion.ISEG – Departamento de EconomiaRepositório da Universidade de LisboaAfonso, AntónioGomes, PedroTaamouti, Abderrahim2014-11-05T13:38:48Z20142014-01-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10400.5/7422engAfonso, António, Pedro Gomes e Abderrahim Taamouti .2014. "Sovereign credit ratings, market volatility, and financial gains". Instituto Superior de Economia e Gestão.DE Working papers nº 6-2014/DE/UECE2183-1815info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-03-06T14:38:08Zoai:www.repository.utl.pt:10400.5/7422Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T16:54:36.251698Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse
dc.title.none.fl_str_mv Sovereign credit ratings, market volatility, and financial gains
title Sovereign credit ratings, market volatility, and financial gains
spellingShingle Sovereign credit ratings, market volatility, and financial gains
Afonso, António
Sovereign Ratings
Yields
Stock Market Returns
Volatility
EGARCH
Optimal Portfolio
Financial Gain
Risk Management
Value-at-Risk
title_short Sovereign credit ratings, market volatility, and financial gains
title_full Sovereign credit ratings, market volatility, and financial gains
title_fullStr Sovereign credit ratings, market volatility, and financial gains
title_full_unstemmed Sovereign credit ratings, market volatility, and financial gains
title_sort Sovereign credit ratings, market volatility, and financial gains
author Afonso, António
author_facet Afonso, António
Gomes, Pedro
Taamouti, Abderrahim
author_role author
author2 Gomes, Pedro
Taamouti, Abderrahim
author2_role author
author
dc.contributor.none.fl_str_mv Repositório da Universidade de Lisboa
dc.contributor.author.fl_str_mv Afonso, António
Gomes, Pedro
Taamouti, Abderrahim
dc.subject.por.fl_str_mv Sovereign Ratings
Yields
Stock Market Returns
Volatility
EGARCH
Optimal Portfolio
Financial Gain
Risk Management
Value-at-Risk
topic Sovereign Ratings
Yields
Stock Market Returns
Volatility
EGARCH
Optimal Portfolio
Financial Gain
Risk Management
Value-at-Risk
description The reaction of EU bond and equity market volatilities to sovereign rating announcements (Standard & Poor’s, Moody’s, and Fitch) is investigated using a panel of daily stock market and sovereign bond returns. The parametric volatilities are filtered using EGARCH specifications. The estimation results show that upgrades do not have significant effects on volatility, but downgrades increase stock and bond market volatility. Contagion is present, with sovereign rating announcements creating interdependence among European financial markets with upgrades (downgrades) in one country leading to a decrease (increase) in volatility in other countries. The empirical results show also a financial gain and risk (value-at-risk) reduction for portfolio returns when taking into account sovereign credit ratings’ information for volatility modelling, with financial gains decreasing with higher risk aversion.
publishDate 2014
dc.date.none.fl_str_mv 2014-11-05T13:38:48Z
2014
2014-01-01T00:00:00Z
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv http://hdl.handle.net/10400.5/7422
url http://hdl.handle.net/10400.5/7422
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv Afonso, António, Pedro Gomes e Abderrahim Taamouti .2014. "Sovereign credit ratings, market volatility, and financial gains". Instituto Superior de Economia e Gestão.DE Working papers nº 6-2014/DE/UECE
2183-1815
dc.rights.driver.fl_str_mv info:eu-repo/semantics/openAccess
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
dc.publisher.none.fl_str_mv ISEG – Departamento de Economia
publisher.none.fl_str_mv ISEG – Departamento de Economia
dc.source.none.fl_str_mv reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
instacron:RCAAP
instname_str Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
instacron_str RCAAP
institution RCAAP
reponame_str Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
collection Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
repository.name.fl_str_mv Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação
repository.mail.fl_str_mv
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