Volume : V, Issue : VIII, August - 2015

A study on the impact of bond rating changes on the stock prices in India

Archana Hn, Dr. S. Jayanna

Abstract :

We examine whether there is any significant relationship between credit ratings announcement (Upgrades and Downgrades) and equity returns in Indian market. For this purpose, we employ event study methodology. We use 61 days event window, 30 days (–1 to –30) before the announcement and 30 days (1 to 30) after the announcement and 0th day, the announcement or the event day. William Sharpe’s single index model also known as market adjusted model is employed to measure the expected return from the security; parametric t test is used to measure the significance of the average abnormal returns (AAR) and cumulative average abnormal returns (CAAR). The results show statistically insignificant abnormal returns for both upgrades and downgrades, highlighting that credit rating does not provide any new information to the equity market.

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Article: Download PDF   DOI : 10.36106/ijar  

Cite This Article:

Archana HN, Dr. S. Jayanna A Study on the Impact of Bond Rating Changes on the Stock Prices in India Indian Journal of Applied Research, Vol.5, Issue : 8 August 2015

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