In this paper we examine how well CreditWatch is used by credit rating agencies to balance two conflicting goals: rating timeliness and rating stability. Examining equity market reactions around CreditWatch events in 2002-2005, we find evidence that while CreditWatch has improved rating timeliness, its intended purpose has not been completely achieved. Equity prices start to change days before companies are listed on CreditWatch and abnormal equity returns of firms prior to being listed on CreditWatch are effective predictors of the ultimate change in ratings. The findings in the study suggest that in the pursuit of rating stability, rating agencies may have sacrificed rating timeliness.

In this paper we examine the extent to which personal consumptions are sheltered from state-specific economic shocks because of banks' mortgage loan securitizations. We posit that securitization contributes to personal consumption smoothening due to securitizations' positive effect on banks' credit supply, which reduces consumers' consumption constraints during economic shocks. Using data for U. S. banks' mortgage loan securitizations from 1989 to 2008, we show that personal consumption smoothening is positively related to securitization. The finding of a significant relationship between loan securitizations and consumption smoothening contributes to the continuing debate on the role of financial innovation in real economy.

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In this paper, we show that the price of a premium bond and the price of a discount bond will both move toward face value at an increasing rate as the bonds approach maturity. We present a mathematical proof to show that the decline in premium and discount decline over time, to be referred to as time decay, accelerates as time passes by. We also provide numerical examples and graphical representations to illustrate the time passage effect on bond prices and discuss the implications of the findings to bond investor and asset managers in light of the quantitative easing policies taken by central banks after the 2008 financial crisis.