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

Research output: Contribution to journalArticle

13 Citations (Scopus)

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

Fingerprint

investor
rating
asymmetry
insurance
Investors
Rating
Municipal bonds
market
costs

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Public Administration

Cite this

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

In: Public Budgeting and Finance, Vol. 22, No. 3, 01.01.2002, p. 115-131.

Research output: Contribution to journalArticle

@article{9f9f8324e1f245ba9fc955b76385313c,
title = "Do investors look beyond insured triple–a rating? an analysis of standard & poor’s underlying ratings",
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.",
author = "Jun Peng",
year = "2002",
month = "1",
day = "1",
doi = "10.1111/1540-5850.00084",
language = "English (US)",
volume = "22",
pages = "115--131",
journal = "Public Budgeting and Finance",
issn = "0275-1100",
publisher = "Wiley-Blackwell",
number = "3",

}

TY - JOUR

T1 - Do investors look beyond insured triple–a rating? an analysis of standard & poor’s underlying ratings

AU - Peng, Jun

PY - 2002/1/1

Y1 - 2002/1/1

N2 - 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.

AB - 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.

UR - http://www.scopus.com/inward/record.url?scp=57649167283&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=57649167283&partnerID=8YFLogxK

U2 - 10.1111/1540-5850.00084

DO - 10.1111/1540-5850.00084

M3 - Article

AN - SCOPUS:57649167283

VL - 22

SP - 115

EP - 131

JO - Public Budgeting and Finance

JF - Public Budgeting and Finance

SN - 0275-1100

IS - 3

ER -