Credit rating announcements, trading activity and yield spreads: the Spanish evidence
by Pilar Abad; Antonio Díaz; M. Dolores Robles-Fernández
International Journal of Monetary Economics and Finance (IJMEF), Vol. 5, No. 1, 2012

Abstract: We test whether different rating announcements contain pricing-relevant information and modify trading activity patterns in the Spanish corporate debt markets. We observe a significant widening of yield spreads in short- and long-term corporate debt after reviews of downgrades and negative outlook reports. Additionally, certain rating announcements encourage trading activity even when the information is not pricing-relevant. The release of information arouses investor interest for the involved securities. Thus, trading frequency increases, although larger-sized transactions, which should denote possible portfolio rebalancing, are not observed. In the short-term market, trading volumes are found to fade after reviews for downgrade.

Online publication date: Mon, 26-Dec-2011

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