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政大機構典藏 > 商學院 > 財務管理學系 > 期刊論文 > Item 140.119/72692

Please use this identifier to cite or link to this item: https://nccur.lib.nccu.edu.tw/handle/140.119/72692

Title:	Market-based Evaluation for Models to Predict Bond Ratings
Authors:	湛可南 Chan, Konan;Jegadeesh, Narasimhan
Contributors:	財管系
Keywords:	Bond rating prediction;relative rating strength portfolio;bond trading strategy;bond market efficiency
Date:	2004
Issue Date:	2015-01-08 17:50:02 (UTC+8)
Abstract:	Previous studies have examined different statistical models to predict corporate bond ratings. However, these papers use agency ratings as the benchmark to assess models and ignore the evidence that agency ratings may not be accurate in a timely manner. In this paper, we propose a new approach which incorporates ex-post bond returns to evaluate rating prediction models. Relative rating strength portfolios, formed by buying under-rated bonds with agency ratings lower than model ratings and selling over-rated bonds with agency ratings higher than model ratings, are employed to test the performance of different statistical models in rating predictions. Our results show that one version of multiple discriminant analysis model can generate a statistically significant abnormal return of 5% over a 5-year horizon. The ordered probit model which is believed to possess theoretical advantages in classifying bonds does not perform better. This suggests that using traditional measures to evaluate models can be misleading. The existence of a profitable trading strategy also raises the concern of market efficiency in the corporate bond market.
Relation:	Review of Pacific Basin Financial Markets and Policies, 7(2), 153-172
Data Type:	article
Appears in Collections:	[財務管理學系] 期刊論文

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