Friday 10 August 2012
Wednesday 23 May 2012
Quality of credit reports
Credit ratings agencies have played a high-profile and pivotal role in financial markets since the downturn, with some of their decisions making headlines for all the wrong reasons. Regulators and industry experts have called into question the reliability and usefulness of credit rating agencies and, as new research shows, for good reason.
‘Our research proves what many critics of credit ratings agencies have been arguing for years – that the accuracy and informational value of corporate credit ratings is dishearteningly low. Ratings are not an optimal predictor of default probability. They explain little of the variation in default probability across firms and they fail to capture the considerable variation in default probabilities and empirical failure rate over the business cycle,‘ says Dr Mungo Wilson, Lecturer in Financial Economics at the Saïd Business School, University of Oxford.
Credit ratings remain the most common and widely used measure of corporate credit quality, a position challenged by a new paper from Dr Wilson and Jens Hilscher, Assistant Professor of Finance at Brandeis University.
This is an extract from a paper by Mungo Wilson, Saïd Business School, University of Oxford, and Jens Hilscher, Brandeis University.
What is your experience with the quality of credit reports. Are they accurate? Have you found any data errors? If you have - what was the reaction of the credit rating agencies?
The full paper is available at: http://people.brandeis.edu/~hilscher/CreditRatings_HilscherWilson_Jan2012.pdf
‘Our research proves what many critics of credit ratings agencies have been arguing for years – that the accuracy and informational value of corporate credit ratings is dishearteningly low. Ratings are not an optimal predictor of default probability. They explain little of the variation in default probability across firms and they fail to capture the considerable variation in default probabilities and empirical failure rate over the business cycle,‘ says Dr Mungo Wilson, Lecturer in Financial Economics at the Saïd Business School, University of Oxford.
Credit ratings remain the most common and widely used measure of corporate credit quality, a position challenged by a new paper from Dr Wilson and Jens Hilscher, Assistant Professor of Finance at Brandeis University.
This is an extract from a paper by Mungo Wilson, Saïd Business School, University of Oxford, and Jens Hilscher, Brandeis University.
What is your experience with the quality of credit reports. Are they accurate? Have you found any data errors? If you have - what was the reaction of the credit rating agencies?
The full paper is available at: http://people.brandeis.edu/~hilscher/CreditRatings_HilscherWilson_Jan2012.pdf
Subscribe to:
Posts (Atom)