Credit Ratings and Credit Risk: Is One Measure Enough?

• 成果类型: Article
• 署名作者: Hilscher, Jens; Wilson, Mungo
• 署名单位: University of California System; University of California Davis; University of Oxford; University of Oxford
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2016.2514
• 发表日期: 2017
• 页码: 3414-3437
• 关键词: Credit rating; Credit risk; Default probability; FORECAST ACCURACY; systematic default risk

摘要

This paper investigates the information in corporate credit ratings. If ratings are to be informative indicators of credit risk, they must reflect what a risk-averse investor cares about: both raw default probability and systematic risk. We find that ratings are relatively inaccurate measures of raw default probability-they are dominated as predictors of failure by a simple model based on publicly available financial information. However, ratings do contain relevant information since they are related to a measure of exposure to common (and undiversifiable) variation in default probability (failure beta). Systematic risk is shown to be related to joint default probabilities in the context of the Merton [ Merton RC (1974) On the pricing of corporate debt: The risk structure of interest rates. J. Finance 29(2):449-470] model. Empirically, it is related to credit default swap spreads and risk premia. Given the multidimensional nature of credit risk, it is not possible for one measure to capture all the relevant information.