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Rating puzzle

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  • pgreenfinch
    Hello How come a rating agency decision that rests on fundamentals that were already public knowledge has a sizeable effect on markets on the day it is
    Message 1 of 3 , Apr 20 9:54 AM
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      Hello

      How come a rating agency decision that rests on
      fundamentals that were already public knowledge
      has a sizeable effect on markets on the day it
      is released?

      Of course, there are also cases when the market did
      not have all the information that are available to
      a rating agency and that led to its decisions.
      Thus a more general question: are there statistical
      studies on market behaviors before and after rating
      changes?

      Peter
    • Kc
      As far as I can observe, the impact on the markets can vary a lot from time to time and may not be consistent. Anyway, such news can be used by traders to test
      Message 2 of 3 , Apr 24 9:22 PM
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        As far as I can observe, the impact on the markets can vary a lot from time to time and may not be consistent.

        Anyway, such news can be used by traders to test either the upside or downside of the markets. Once traders can successfully drive the market to one side, herding usually follows.

        K.C.

        Sent from my iPad

        On 2011-04-20, at 12:54 PM, "pgreenfinch" <pgreenfinch@...> wrote:

         

        Hello

        How come a rating agency decision that rests on
        fundamentals that were already public knowledge
        has a sizeable effect on markets on the day it
        is released?

        Of course, there are also cases when the market did
        not have all the information that are available to
        a rating agency and that led to its decisions.
        Thus a more general question: are there statistical
        studies on market behaviors before and after rating
        changes?

        Peter

      • Venkat Iyer
        Hi Peter, You are right to say most of the information being in public domain , yet the rating has an advantage as they are subject to the following:
        Message 3 of 3 , Apr 24 10:19 PM
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          Hi Peter,

          You are right to say most of the information being in public domain , yet the
          rating has an advantage as they are subject to the following:

          structured form of study
          parameters as applicable for the respective industry
          detailsd past , present and future course and directions
          business risk , beta and other parameters including peer comparison not only
          with the benchmarked company / ies.
          not to forget the management skills and profitability

          It is true that there is subjectivity involved in these agency and thus one
          finds some get a way out.

          Other members views solicited.

          Venkat


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