PT  - JOURNAL ARTICLE
AU  - Pankaj K. Jain
AU  - Qin Wang
TI  - Credit-Rating Changes and Institutional Trading
AID  - 10.3905/jot.2012.8.1.038
DP  - 2012 Dec 31
TA  - The Journal of Trading
PG  - 38--47
VI  - 8
IP  - 1
4099  - https://pm-research.com/content/8/1/38.short
4100  - https://pm-research.com/content/8/1/38.full
AB  - Proactive bond-rating changes, especially downgrades, are associated with heightened equity market trading by institutional investors. Institutional sell minus buy imbalance jumps from almost 0 to nearly 13% of the total volume in the 5-day period preceding downgrades, controlling for other determinants of volume. Trades consistent with credit-rating changes are more profitable than those consistent with equity analysts’ recommendations. Rating changes have an incremental explanatory power for overall profitability of institutional trades controlling for past returns, momentum, Fama–French factors, and regulation fair disclosure in periods both before and after the financial crisis.TOPICS: Equity portfolio management, volatility measures, risk management