Bond Rating Agencies and Stock Analysts: Who Knows What When?

Bond Rating Agencies and Stock Analysts: Who Knows What When?

Both bond ratings agencies and stock analysts evaluate publicly traded companies and communicate their opinions to investors. Comparing the timelines of each, it is found that Granger causality flows both ways. While most bond downgrades are preceded by declines in actual and forecasting earnings, b...

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Bibliographic Details
Main Authors: EDERINGTON, Louis H., GOH, Jeremy C.
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 1998
Subjects:
Net income
Earnings forecasting
Analytical forecasting
Forecasting models
Bond rating
Coefficients
Causality
Finance
Stock analysis
Forecasting techniques
Corporate Finance
Finance and Financial Management
Online Access:https://ink.library.smu.edu.sg/lkcsb_research/2200
https://ink.library.smu.edu.sg/context/lkcsb_research/article/3199/viewcontent/BondRatingAgenciesStockAnalysts_1996_pp.pdf
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Institution: Singapore Management University
Language: English
Description
Summary:Both bond ratings agencies and stock analysts evaluate publicly traded companies and communicate their opinions to investors. Comparing the timelines of each, it is found that Granger causality flows both ways. While most bond downgrades are preceded by declines in actual and forecasting earnings, both actual earnings and forecasts of future earnings tend to fall following downgrades. Although part of this post-downgrade forecast revision can be attributed to negative news regarding actual earnings, most appears to be reaction to the downgrade itself. Little change is found in actual earnings following upgrades. Analysts, however, tend to increase their forecasts of future earnings.

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