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Does Sovereign Rating Announcement have symmetrical Effect on Stock Market Returns?Case Study: Amman Stock Exchange (ASE)

Journal: Albalqa Journal for Research and Studies (Vol.18, No. 1)

Publication Date:

Authors : ;

Page : 51-91

Keywords : sovereign rating-symmetrical-S&P500; Moody’s-event study-stock returns-ASE-Jordan.;

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This paper aims to investigate whether the effect of Sovereign rating change is symmetrical or not. As well as are the effects are same of Sovereign rating upgrades and downgrades announcement on stock return in the Amman Stock Exchange (ASE). In this study, the event study methodology was applied to analyse the effect of ten announcements (included four upgrades and six downgrades) from the rating agency S&P500 and Moody's over the period 2003-2013. By using the daily closing price of Amman free float market index as a proxy for return and an event period which are set as [-10, +10] days and [-5, +5] days. The findings of the study reveal the following: an asymmetrical effect of sovereign rating announcement on Amman Stock Exchange returns, upgrades rating has a significant positive reaction on prices (two out of four upgrade events have a significant positive reaction on stock price), and downgrades rating has no significant reaction on prices (one out of six downgrade events has a significant negative reaction on stock price). These findings would be useful to issuers, investors, and decision makers in assessing the credit risk of Amman stock exchange issuance.

Last modified: 2020-03-29 21:38:52