Do sovereign credit ratings influence regional stock and bond market interdependencies in emerging countries?

Christopher, R; Kim, SJ; Wu, E

Do sovereign credit ratings influence regional stock and bond market interdependencies in emerging countries?

Christopher, R Kim, SJ Wu, E

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Publication Type:: Journal Article
Citation:: Journal of International Financial Markets, Institutions and Money, 2012, 22 (4), pp. 1070 - 1089
Issue Date:: 2012-10-01

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Field	Value	Language
dc.contributor.author	Christopher, R	en_US
dc.contributor.author	Kim, SJ	en_US
dc.contributor.author	Wu, E	en_US
dc.date.issued	2012-10-01	en_US
dc.identifier.citation	Journal of International Financial Markets, Institutions and Money, 2012, 22 (4), pp. 1070 - 1089	en_US
dc.identifier.issn	1042-4431	en_US
dc.identifier.uri	http://hdl.handle.net/10453/18825
dc.description.abstract	We investigate the permanent and transitory effects of sovereign credit ratings on time-varying stock and bond market correlations with their respective regional markets for a sample of up to nineteen emerging countries over the period from 1 January 1994 to 1 July 2007. We find that stock and bond market co-movements within a region respond heterogeneously to sovereign ratings information. Sovereign ratings and outlooks tend to be positively related to regional stock market co-movements suggesting that there are positive rating spillover effects whereby upgrades provide common benefits for neighboring countries in the region, however downgrades would lead to investors shifting funds from the downgraded market into the surrounding region. In contrast, sovereign rating and outlooks tend to be negatively related to regional bond market co-movements suggesting the existence of contagion during periods of ratings and outlook downgrades (negative rating spillover effects). We find the negative influence is concentrated in the countries that have higher foreign currency debt ratings than the regional average. © 2012 Elsevier B.V..	en_US
dc.relation.ispartof	Journal of International Financial Markets, Institutions and Money	en_US
dc.relation.isbasedon	10.1016/j.intfin.2012.01.003	en_US
dc.subject.classification	Finance	en_US
dc.title	Do sovereign credit ratings influence regional stock and bond market interdependencies in emerging countries?	en_US
dc.type	Journal Article
utslib.citation.volume	4	en_US
utslib.citation.volume	22	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
utslib.for	1402 Applied Economics	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
utslib.copyright.status	open_access
pubs.issue	4	en_US
pubs.publication-status	Published	en_US
pubs.volume	22	en_US

Abstract:

We investigate the permanent and transitory effects of sovereign credit ratings on time-varying stock and bond market correlations with their respective regional markets for a sample of up to nineteen emerging countries over the period from 1 January 1994 to 1 July 2007. We find that stock and bond market co-movements within a region respond heterogeneously to sovereign ratings information. Sovereign ratings and outlooks tend to be positively related to regional stock market co-movements suggesting that there are positive rating spillover effects whereby upgrades provide common benefits for neighboring countries in the region, however downgrades would lead to investors shifting funds from the downgraded market into the surrounding region. In contrast, sovereign rating and outlooks tend to be negatively related to regional bond market co-movements suggesting the existence of contagion during periods of ratings and outlook downgrades (negative rating spillover effects). We find the negative influence is concentrated in the countries that have higher foreign currency debt ratings than the regional average. © 2012 Elsevier B.V..

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http://hdl.handle.net/10453/18825