Reactions of stock returns to Moody's bond rating changes: An event study on the stock market efficiency in Southeast Asian emerging markets: Thailand, Indonesia and Philippines

• Main Authors: Cheng, Evangeline, Cua, Kathryn, Hao, Johnin, Zialcita, Stephanie
• Format: text
• Language: English
• Published: Animo Repository 2012
• Subjects: Stock exchanges > Asia, Southeastern; Finance and Financial Management
• Online Access: https://animorepository.dlsu.edu.ph/etd_bachelors/8990
• Institution: De La Salle University

Conventional wisdom has given us the idea that markets are efficient as security prices and returns reflect all relevant information hence the efficient market hypothesis. However, recent studies on market efficiency show the contrary. Studies by Hand, et al. (1992), Taib, et al. (2006) and Micu, et al. (2006), found that when event such as rating changes occur, it results to abnormal return. Moreover, this study reveals that stock market reacts significantly to such changes, which means that it contains information that are not reflected in the prices (and returns). Along with this finding, our research examined how an emerging economy's stock market reacts to rating changes through event study.