Investors’ heterogeneous beliefs and the impact of sovereign credit ratings in foreign exchange and equity markets

Vu  Tran; Rasha Alsakka; Owain ap Gwilym

doi:10.1080/1351847X.2019.1586743

Investors’ heterogeneous beliefs and the impact of sovereign credit ratings in foreign exchange and equity markets

Ysgol Busnes Albert Gubay

Swansea University

Allbwn ymchwil: Cyfraniad at gyfnodolyn › Erthygl › adolygiad gan gymheiriaid

208 Wedi eu Llwytho i Lawr (Pure)

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We propose a model in which sovereign credit news from multiple rating agencies interacts with market heterogeneity. The model illustrates that the first messenger discloses new information while additional messengers play an important role of coordinating heterogeneous beliefs. Empirical investigations based on sovereign credit ratings, foreign exchange and equity markets confirm that rating news coordinates investors’ beliefs. Sovereign credit rating news from both types of messenger induces a significant impact on exchange rates and stock indices. Volatility measures increase in response to news from the first messenger while ex-post volatility reduces following news from an additional messenger.

Iaith wreiddiol	Saesneg
Tudalennau (o-i)	1211-1233
Cyfnodolyn	European Journal of Finance
Cyfrol	25
Rhif cyhoeddi	13
Dyddiad ar-lein cynnar	14 Maw 2019
Dynodwyr Gwrthrych Digidol (DOIs)	https://doi.org/10.1080/1351847X.2019.1586743
Statws	Cyhoeddwyd - 2 Medi 2019

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10.1080/1351847X.2019.1586743

EJF-Accepted-Investors’ heterogeneous beliefsLlawysgrif awdur wedi’i dderbyn, 674 KB

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@article{3567906ac37148aaa495c5e3472660e5,

title = "Investors{\textquoteright} heterogeneous beliefs and the impact of sovereign credit ratings in foreign exchange and equity markets",

abstract = "We propose a model in which sovereign credit news from multiple rating agencies interacts with market heterogeneity. The model illustrates that the first messenger discloses new information while additional messengers play an important role of coordinating heterogeneous beliefs. Empirical investigations based on sovereign credit ratings, foreign exchange and equity markets confirm that rating news coordinates investors{\textquoteright} beliefs. Sovereign credit rating news from both types of messenger induces a significant impact on exchange rates and stock indices. Volatility measures increase in response to news from the first messenger while ex-post volatility reduces following news from an additional messenger. ",

keywords = "Sovereign credit ratings, information content, market heterogeneity, price volatility",

author = "Vu Tran and Rasha Alsakka and \{ap Gwilym\}, Owain",

note = "2019 Taylor \& Francis. This is the author accepted manuscript. The final version is available from Taylor \& Francis via https://doi.org/10.1080/1351847X.2019.1586743.",

year = "2019",

month = sep,

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doi = "10.1080/1351847X.2019.1586743",

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AU - Tran, Vu

AU - Alsakka, Rasha

AU - ap Gwilym, Owain

N1 - 2019 Taylor & Francis. This is the author accepted manuscript. The final version is available from Taylor & Francis via https://doi.org/10.1080/1351847X.2019.1586743.

PY - 2019/9/2

Y1 - 2019/9/2

N2 - We propose a model in which sovereign credit news from multiple rating agencies interacts with market heterogeneity. The model illustrates that the first messenger discloses new information while additional messengers play an important role of coordinating heterogeneous beliefs. Empirical investigations based on sovereign credit ratings, foreign exchange and equity markets confirm that rating news coordinates investors’ beliefs. Sovereign credit rating news from both types of messenger induces a significant impact on exchange rates and stock indices. Volatility measures increase in response to news from the first messenger while ex-post volatility reduces following news from an additional messenger.

AB - We propose a model in which sovereign credit news from multiple rating agencies interacts with market heterogeneity. The model illustrates that the first messenger discloses new information while additional messengers play an important role of coordinating heterogeneous beliefs. Empirical investigations based on sovereign credit ratings, foreign exchange and equity markets confirm that rating news coordinates investors’ beliefs. Sovereign credit rating news from both types of messenger induces a significant impact on exchange rates and stock indices. Volatility measures increase in response to news from the first messenger while ex-post volatility reduces following news from an additional messenger.

KW - Sovereign credit ratings

KW - information content

KW - market heterogeneity

KW - price volatility

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DO - 10.1080/1351847X.2019.1586743

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JO - European Journal of Finance

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ER -

Investors’ heterogeneous beliefs and the impact of sovereign credit ratings in foreign exchange and equity markets

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