Emerging Markets Instability : Do Sovereign Ratings Affect Country Risk and Stock Returns?
Financial market instability has been
the focus of attention of both academic and policy circles.
Rating agencies have been under particular scrutiny lately
as promoters of financial excesses, upgrading countries in
good times and downgrading them in bad times. Using a panel
of emerging economies, this paper examines whether sovereign
ratings affect financial markets. The authors find that
changes in sovereign ratings have an impact on country risk
and stock returns. They also find that these changes are
transmitted across countries, with neighbor-country effects
being more significant. Rating upgrades (downgrades) tend to
occur following market rallies (downturns). Countries with
more vulnerable economies, as measured by low ratings, are
more sensitive to changes in U.S. interest rates.
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Bibliographic Details
Main Authors: |
Kaminsky, Graciela,
Schmukler, Sergio L. |
Language: | English en_US |
Published: |
World Bank, Washington, DC
2001-09
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Subjects: | ACCOUNTING STANDARDS,
ASYMMETRIC INFORMATION,
BENCHMARK,
BONDS,
CAPITAL FLOWS,
CAPITAL MARKETS,
COMMERCIAL BANKS,
CONTAGION,
CREDIT RATINGS,
DEBT,
DEFAULT RISK,
DEVALUATION,
DEVELOPED COUNTRIES,
DOMESTIC STOCK MARKETS,
ECONOMETRICS,
ECONOMIC GROWTH,
ECONOMICS,
EMERGING MARKETS,
EXCHANGE RATE,
FEDERAL RESERVE BANK OF NEW YORK,
FINANCIAL CRISES,
FINANCIAL MARKETS,
FOREIGN EXCHANGE,
GLOBALIZATION,
INTEREST RATE,
INTEREST RATES,
INTERNATIONAL BANKS,
LEADING INDICATORS,
LIQUIDITY,
MARKET LIBERALIZATION,
MARKET PRICES,
MARKET RISK,
MONETARY POLICY,
MORAL HAZARD,
MUTUAL FUND,
MUTUAL FUNDS,
PRICE INDEXES,
PROBABILITY OF DEFAULT,
RATING AGENCIES,
RESERVES,
SECURITIES,
SECURITIES MARKETS,
SOVEREIGN RISK,
STOCK MARKETS,
STOCK PRICES,
TRANSPARENCY, |
Online Access: | http://documents.worldbank.org/curated/en/2001/09/2874364/emerging-markets-instability-sovereign-ratings-affect-country-risk-stock-returns
https://hdl.handle.net/10986/19550
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