{"title":"Why Do CDO Downgrade Announcements Impact the Bank’s Share Price?","authors":"A. Deb, D. Schiereck","doi":"10.2139/ssrn.2023685","DOIUrl":"https://doi.org/10.2139/ssrn.2023685","url":null,"abstract":"The collapse of the collateralized debt obligation (CDO) market brought attention to the soundness of the involved banks. We infer equity price reaction from rating announcements that are either negative rating outlooks or rating downgrades of CDO. To explain the market reactions, we consider rating shopping and rating grade inflation, reputation of rating agencies, sophisticated or trusting investor behavior and informational asymmetry. While these approaches are not mutually exclusive, our results indicate strong support for regime and time dependency of the sophisticated or trusting investor behavior and informational asymmetry. The trusting investor was dominant in times of market growth right before the outbreak of the financial crisis. This perception has changed so that the sophisticated investor is dominant. Even though rating announcements were expected, feedback channels exist that result in losses. When comparing the stock price reaction of bank related rating announcements, we find that the long term financial outlook is a decisive factor for the investor. As such, we take the bank’s issuer rating and perceive that price effects are well anticipated before the actual announcement day. We interpret the differing market reactions with the availability of information and refer this to an informational asymmetry issue.","PeriodicalId":411361,"journal":{"name":"ERN: Information (Topic)","volume":"27 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-03-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134179617","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Informed Trading in Corporate Bonds Prior to Earnings Announcements","authors":"Jason Wei, Xing (Alex) Zhou","doi":"10.2139/ssrn.2023494","DOIUrl":"https://doi.org/10.2139/ssrn.2023494","url":null,"abstract":"This paper examines the information contents of trading activities in the corporate bond market prior to earnings announcements. We find that the direction of pre-announcement bond trading is significantly related to earnings surprises. Such linkage is most evident prior to negative news and in high-yield bonds. Further, abnormal bond trading during the pre-announcement period can help predict post-announcement bond returns. Such predictive power of bond trading largely originates from institutional sized trades, and it is concentrated in the issuer’s most actively traded bond. Lastly, even after accounting for transactions costs, informed bond trading can generate significant net profits, especially prior to the release of bad news.","PeriodicalId":411361,"journal":{"name":"ERN: Information (Topic)","volume":"60 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-01-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123236578","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"An Actuarial Analysis of Calibration of Crop Insurance Premiums to Heterogeneous Risks","authors":"Malini Nair","doi":"10.2139/ssrn.2001451","DOIUrl":"https://doi.org/10.2139/ssrn.2001451","url":null,"abstract":"This paper examines whether the loadings on the crop insurance premium rates for risks such as moral hazard and adverse selection are adequate. From the discrete choice (tobit) analysis conducted, we discover that the premium loadings for 75% coverage level are not adequate, resulting in losses for the Risk Management Agency.","PeriodicalId":411361,"journal":{"name":"ERN: Information (Topic)","volume":"34 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2005-12-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125094137","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}