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/10400.5/25580
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 defined 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, and sovereign rating announcements create 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 (valueat- 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 defined 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, and sovereign rating announcements create 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 (valueat- risk) reduction for portfolio returns when taking into account sovereign credit ratings’ information for volatility modelling, with financial gains decreasing with higher risk aversion.ElsevierRepositório da Universidade de LisboaAfonso, AntónioGomes, PedroTaamouti, Abderrahim2022-09-22T14:15:02Z20142014-01-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10400.5/25580engAfonso, António; Pedro Gomes and Abderrahim Taamouti. (2014). "Sovereign credit ratings, market volatility, and financial gains". Computational Statistics & Data Analysis, Vol. 76: pp. 20-33.0167-94710.1016/j.csda.2013.09.028info: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:RCAAP2023-03-06T14:55:08Zoai:www.repository.utl.pt:10400.5/25580Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T17:09:24.985782Repositório 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 defined 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, and sovereign rating announcements create 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 (valueat- 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
2014-01-01T00:00:00Z
2022-09-22T14:15:02Z
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/10400.5/25580
url http://hdl.handle.net/10400.5/25580
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv Afonso, António; Pedro Gomes and Abderrahim Taamouti. (2014). "Sovereign credit ratings, market volatility, and financial gains". Computational Statistics & Data Analysis, Vol. 76: pp. 20-33.
0167-947
10.1016/j.csda.2013.09.028
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 Elsevier
publisher.none.fl_str_mv Elsevier
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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