RT Journal Article
SR Electronic
T1 Credit-Rating Changes and Institutional Trading
JF The Journal of Trading
FD Institutional Investor Journals
SP 38
OP 47
DO 10.3905/jot.2012.8.1.038
VO 8
IS 1
A1 Pankaj K. Jain
A1 Qin Wang
YR 2012
UL https://pm-research.com/content/8/1/38.abstract
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