Credit ratings and predictability of stock return dynamics of the BRICS and the PIIGS: Evidence from a nonparametric causality-in-quantiles approach

This paper provides a novel perspective on the predictive ability of credit rating announcements over stock market returns and volatility using methodology that formally distinguishes between different states can be characterized as bull, bear normal conditions. Using data published by three well-established agencies BRICS PIIGS markets, we show markets react heterogeneously, in quantile-specific patterns, to with more persistent widespread effects observed for markets. The effect is generally stronger case returns, implying significant risk these announcements. Finally, aggregate ratings driven mostly upgrades rather than downgrades, asymmetry during good bad times. Overall, our findings models greatly enhanced disaggregating overall taking into account nonlinearity relationship return dynamics.