Are credit ratings procyclical?

Article Abstract:

It is a fact that credit ratings vary according to the state of the business cycle, and the question is asked whether credit ratings are extremely biased in their assignment of ratings. An analysis is made based on a model of ratings determination that factors in the business and financial risks of firms, in addition to indicators of macroeconomic conditions. The findings are interesting in that they do not show excess sensitivity to the business cycle.

Business cycles

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Ratings versus market--based measures of default risk in portfolio governance

Article Abstract:

The question arises whether ratings or market-based measures of default risk are more suitable for formulating governance rules. Buy and sell restrictions, which comprise these rules, are used in investment management. The alternative to ratings is market-based credit risk measures, which are a natural benchmark to measure ratings. They are conceptually different, and valuable to use as complementary measures.

Forecasts, trends, outlooks, Forecasts and trends, Market trend/market analysis

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