tag:blogger.com,1999:blog-4159906646513306121.post1873934597820038204..comments2023-11-19T20:38:50.237-08:00Comments on Economic Logic: European credit ratings: a case of self-fulfilling expectationsEconomic Logicianhttp://www.blogger.com/profile/10171296292101248614noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-4159906646513306121.post-35733114006260750512011-11-23T02:12:53.807-08:002011-11-23T02:12:53.807-08:00Well, the downgrade of France is less a question o...Well, the downgrade of France is less a question of information (reliable of not) than a political issue I believe. With the election in 5 months, the credit agencies knows the impact a credit rating downgrade could have on the french election. Otherwise, France would have lost its triple A for a while...<br /><br />WikiratingWikiratinghttp://www.wikirating.orgnoreply@blogger.comtag:blogger.com,1999:blog-4159906646513306121.post-43786514358131214532011-11-22T12:04:23.749-08:002011-11-22T12:04:23.749-08:00Kansas, there is no way you can distinguish the im...Kansas, there is no way you can distinguish the impact of new information from the automatic change in demand stemming from a change in rating. You cannot say that then market necessarily reacted to new information (implicitly about the risk of the bonds).Vilfredonoreply@blogger.comtag:blogger.com,1999:blog-4159906646513306121.post-71781426203235527022011-11-22T09:05:26.068-08:002011-11-22T09:05:26.068-08:00Wait a moment here. If market valuation reacts to ...Wait a moment here. If market valuation reacts to a rating downgrade, it means that the rating change provided information that the market did not have, and that this information is believable.Kansannoreply@blogger.comtag:blogger.com,1999:blog-4159906646513306121.post-80164244839946173102011-11-22T07:27:01.861-08:002011-11-22T07:27:01.861-08:00Credit rating agencies are useful for obscure secu...Credit rating agencies are useful for obscure securities for which information is costly to obtain. This is where they failed in a major way with the US securitized mortgages.<br /><br />They are not useful for well known assets, like government bonds. The only role here is for the rating to be used in rules-tied investing, like some mutual funds that require securities with some specific ratings. So I suppose the impact the rating downgrades have is to remove some demand from the market, making the price of these bonds plunge. But I agree, these in itself does not mean those bonds got worse.Vilfredonoreply@blogger.com