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THE EFFECT OF BOND RATING AGENCIES ON BOND RATING MODELS
Author(s) -
Perry Larry G.
Publication year - 1985
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.1985.tb00415.x
Subject(s) - bond credit rating , bond , econometrics , linear discriminant analysis , credit rating , actuarial science , economics , rating scale , rating system , mathematics , statistics , finance , credit reference , credit risk , environmental economics
This paper addresses the problem of bond rating discrepancies and their effect on bond rating prediction models. Both Moody's and Standard & Poor's now use modified ratings. Results of this study indicate that the two agencies disagree 58 percent of the time and that Moody's rates bonds significantly lower than S & P. In addition, the classification rates of the multiple discriminant analysis models decrease approximately 24 percentage points when the modified ratings are used.