Do rating agencies’ decisions impact stock returns?
: evidence from US market

  • Sofia Estácio Simões (Student)

Student thesis: Master's Thesis


This dissertation analyses the effect of credit rating decisions on stock returns for the US Market, considering two kinds of events: Upgrades and Downgrades. The data used to conduct the study ranges from 1985 to 2017. To understand the impact of the changes in credit ratings on stock returns, the analysis was applied before and after the event occurred within 10 to 25 days prior and post the event. The abnormal returns are calculated to see if the returns following credit rating changes differ considerably from the expected returns with no change in rating. To see if the discrepancies between the abnormal returns and the expected returns are statistically significant, a standard paired t-test is used on three different windows, T-10 to T+10, T-10 to T+15, and T-15 to T+15, for robustness checks. The results suggest that the credit rating downgrades have a significant impact on stock returns for the whole sample. On the contrary, credit rating upgrades have no significant impact. As for the average predicted returns, for the T-10 to T+10 window, the result for upgrades is 0.02% and for downgrades is -0.09%. For AAR, the result for upgrades is 0.01% and for downgrades is 0.05%.
Date of Award2022
Original languageEnglish
Awarding Institution
  • Universidade Católica Portuguesa
SupervisorMário Meira (Supervisor)


  • Upgrade
  • Downgrade
  • Event study
  • Investment grade
  • Speculative grade


  • Mestrado em Finanças

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