Estimation of Distress Costs Associated with Downgrades Using Regimeswitching Models

North American Actuarial Journal

Volumn 11, Issue 4, 2007, Pages 42-60

  Milidonis, Andreas ^a   Wang, Shaun ^b  

^a UNIVERSITY OF MANCHESTER   (United Kingdom)

^b GEORGIA STATE UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 77955201371     PISSN: 10920277     EISSN: None     Source Type: Journal    
DOI: 10.1080/10920277.2007.10597483     Document Type: Article

References (28)

1. Beaver, W. H., C. Shakespeare, and M. T. Soliman. 2006. Differential Properties in the Ratings of Certified vs. Non-Certified Bond Rating Agencies. Journal of Accounting and Economics, Forthcoming. https://facultygsb. stanford.edu/soliman/research.htm (retrieved July 20, 2006)
2. Black, F., and M. Scholes. 1973. The Pricing of Options and Corporate Liabilities. Journal of Political Economy 81(3): 637-54.
3. Bollen, N. 1998. Valuing Options in Regime-Switching Models. Journal of Derivatives 6(1): 38-49.
4. Ederington, L. H., J. B. Yawitz, and B. E. Roberts. 1987. The Informational Content of Bond Ratings. Journal of Financial Research 10: 211-26.
5. Goh, J. C., and L. H. Ederington. 1993. Is a Bond Rating Downgrade Bad News, Good News, or No News for Stockholders? Journal of Finance 48: 2001-08.
6. Goh, J. C., and L. H. Ederington. 1999. Cross-sectional Variation in the Stock Market Reaction to Bond Rating Changes. Quarterly Review of Economics and Finance 39: 101-12.
7. Goldfeld, S. M., and R. E. Quandt. 1973. A Markov Model for Switching Regressions. Journal of Econometrics 1: 3-16.
8. Grier, P., and S. Katz. 1976. The Differential Effects of Bond Rating Changes among Industrial Public Utility Bonds by Maturity. Journal of Business 49: 226-39.
9. Griffin, P., and A. Z. Sanvicente. 1982. Common Stock Returns and Rating Changes: A Methodological Comparison. Journal of Finance 37: 103-19.
10. Hamilton, J. D. 1989. A New Approach to the Economic Analysis of Non-stationary Time Series. Econometrica 57: 357-84.
11. Hamilton, J. D., and R. Susmel. 1994. Autoregressive Conditional Heteroskedasticity and Changes in Regime. Journal of Econometrics 64: 307-33.
12. Hand, J. R. M., R. W. Holthausen, and R. W. Leftwich. 1992. The Effect of Bond Rating Agency Announcements on Bond and Stock Prices. Journal of Finance 47: 733-52.
13. Hardy, M. R. 2001. A Regime Switching Model of Long Term Stock Returns. North American Actuarial Journal 5(2): 41-53.
14. Harris, G. R. 1997. Regime Switching Vector Autoregressions: A Bayesian Markov Chain Monte Carlo Approach. Proceedings of the 7th International AFIR Colloquium 1: 421-50.
15. Hettenhouse, G., and W. Sartoris. 1976. An Analysis of the Informational Value of Bond Rating Changes. Quarterly Review of Economics and Business 16: 65-78.
16. Ingram, R., L. Brooks, and R. Copeland. 1983. The Information Content of Bond Rating Changes: A Note. Journal of Finance 38: 997-1003.
17. Johnson, R. 2004. Rating Agency Actions around the Investment-Grade Boundary. Journal of Fixed Income 13(4): 25-37.
18. Kliger, D., and O. Sarig. 2000. The Information Value of Bond Ratings. Journal of Finance 55: 2902-79.
19. Liu, P., and A. Thakor. 1984. Interest Yields, Credit Ratings and Economic Characteristics of State Bonds: An Empirical Analysis. Journal of Money, Credit and Banking 16: 344-51.
20. Merton, R. C. 1973. Theory of Rational Option Pricing. Bell Journal of Economics and Management Science 4: 141-83.
21. Merton, R. C. 1974. On the Pricing of Corporate Debt: The Risk Structure of Interest Rates. Journal of Finance 29: 449-70.
22. Merton, R. C. 1977. On the Pricing of Contingent Claims and the Modigliani-Miller Theorem. Journal of Financial Economics 5(2): 241-49.
23. Pinches, G., and J. Singleton. 1978. The Adjustment of Stock Prices to Bond Rating Changes. Journal of Finance 33: 29-44.
24. Vassalou, M., and Y. Xing. 2003. Equity Returns Following Changes in Default Risk: New Insights into the Informational Content of Credit Ratings. Working Paper, Columbia University.
25. Wakeman, M. 1981. The Real Function of Bond Rating Agencies. Chase Financial Quarterly.
26. Watts, R. 1977. Corporate Financial Statements, a Product of the Market and Political Processes. Australian Journal of Management 2: 53-75.
27. Weinsten, M. 1977. The Effect of Rating Change Announcement on Bond Price. Journal of Financial Economics 5: 29-44.
28. West, R. 1973. Bond Ratings, Bond Yields and Financial Regulation: Some Findings. Journal of Law and Economics 16: 159-68.