Rating the rating agencies: Anticipating currency crises or debt crises?

An Empirical Study of International Spillover of Sovereign Risk to Bank Credit Risk

“…S&P has 22 rating categories for long‐term issuer ratings. Similar to previous studies (e.g., Sy, ; Gande and Parsley, ; Ferreira and Gama, ), we convert the letter ratings into 22 corresponding numerical values. In other words, AAA is assigned the value 22, AA+ is 21, and so on (see Appendix 1).…”

The path to impairment: do credit-rating agencies anticipate default events of structured finance transactions?

“…Previous studies suggest that the inclusion of the watchlist status significantly improves the accuracy of default predictions (Hamilton and Cantor 2004). Sy (2004) and Güttler and Wahrenburg (2007) made use of the watchlist information by adding (subtracting) a constant to the numerical rating for a negative (positive) watchlist entry. The magnitude of this adjustment factor is, however, subject to discussion.…”

“…Note that our findings are robust with regard to alternative values. Güttler and Wahrenburg (2007) and Sy (2004) used adjustment factors of 1.0 and 0.67, respectively. 4.…”

To err is human: US rating agencies and the interwar foreign government debt crisis

“…46 The explanatory variables are the variables Cantor and Packer (1996) constructed for the 1920s sample: per capita income (measured as the wealth per capita in 1921 and 1925); growth rates (measured as the average annual GDP growth on a year-to-year basis for 1921-3 and 1925-7, in percentage); inflation (the average annual consumer price rate for 1921-3 and 1925-7, in percentage), fiscal balance (measured as the 42 See Gaillard (2008) for details. 43 See Jüttner and McCarthy (2000), Bhatia (2002), Afonso (2003), Sy (2004), Moody's (2007) for later discussion. Moody's never claimed to have detected a bond whose issue was 'illegal', although it may have used this criterion to vent its spleen about 'unethical bankers'.…”