Do Rating Agencies Exhibit Herding Behaviour? Evidence from Sovereign Ratings

Different rating agencies may have different levels of expertise (reputation) for different countries it is not obvious that such homogeneity holds. We therefore conduct poolability tests within this context to assess this assumption and find evidence of heterogeneity. This leads us to conduct country-by-country timeseries tests, allowing all slope coefficients to vary across countries, to assess the lead-lag relationship among agencies. Our results do not support the expectation that Fitch is a follower for more (a leader for less) countries than Moody’s. Keywords—sovereign ratings, cross-country