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LDC Credit‐risk Forecasting and Banker Judgement
Author(s) -
Somerville R. A.,
Taffler R. J.
Publication year - 2001
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/1468-5957.00380
Subject(s) - judgement , credit rating , sample (material) , economics , econometric model , credit risk , econometrics , actuarial science , financial economics , chromatography , political science , law , chemistry
This paper uses Institutional Investor credit ratings of less‐developed countries (LDCs) as indicators of banker judgement. We estimate a linear econometric model of the rating, and examine its predictive performance up to nine years out‐of‐sample. We conclude that the country‐risk assessments of international banks can be validly replicated by a parsimonious econometric model, reflecting a simple combination of a small amount of data.