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Are All Ratings Created Equal? The Impact of Issuer Size on the Pricing of Mortgage-backed Securities / Jie (Jack) He, Jun 'QJ' Qian, Philip E. Strahan.
- Format:
- Book
- Author/Creator:
- He, Jie (Jack).
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w17238.
- NBER working paper series no. w17238
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2011.
- Summary:
- We examine whether rating agencies (Moody's, S&P, and Fitch) reward large issuers of mortgage-backed securities, who bring substantial business, by granting them unduly favorable ratings. The initial yield on both AAA-rated and non-AAA rated tranches sold by large issuers is higher than that on similar tranches sold by small issuers during the market boom years of 2004-2006. Moreover, the prices of MBS sold by large issuers drop more than those sold by small issuers, and the differences are concentrated among tranches issued during 2004-2006. We conclude that large issuers receive more favorable ratings and that the market prices the risk of inflated ratings, especially during booming periods.
- Notes:
- Print version record
- July 2011.
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