Sovereign credit ratings have asymmetric impact, ECB paper finds

Upgrades had stabilising effect on markets, while downgrades increased volatility

Euro sign, Frankfurt

Markets give a stronger reaction to bad news than good when credit rating agencies announce changes in their sovereign bond ratings, new research published by the European Central Bank has found.

Published today, the working paper, Sovereign credit ratings, market volatility and financial gains, analyses data on market volatility from January 1995 until October 2011 to gauge the impact of upgrades and downgrades to sovereign credit ratings.

The authors find that upgrades had little effect on

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