Do investors look beyond insured triple–a rating? an analysis of standard & poor’s underlying ratings

Research output: Contribution to journalArticle

15 Scopus citations

Abstract

This article demonstrates that for insured municipal bonds, revelation of underlying ratings can be an effective mechanism for further alleviating the information asymmetry problems found in the municipal bond market. Due to the prevalence of municipal bond insurance, investors are increasingly relying on the underlying ratings of insured bonds in gauging the relative riskiness of these bonds. For a sample of 697 municipal bonds issued in 1998, the results indicate that Standard & Poor’s underlying ratings are able to reduce borrowing cost by four basis points, due to the additional information provided through these ratings.

Original languageEnglish (US)
Pages (from-to)115-131
Number of pages17
JournalPublic Budgeting and Finance
Volume22
Issue number3
DOIs
StatePublished - Jan 1 2002

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Public Administration

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