Bond Rating Discrepancies and the Effect on Municipal Bond Yields

Authors

  • Larry G. Perry University of Arkansas
  • Dorla A. Evans Mississippi State University
  • Pu Liu University of Arkansas

DOI:

https://doi.org/10.1016/1057-0810(91)90043-X

Abstract

This paper examines municipal bond rating discrepancies and their impact on interest yield premia. The results indicate that there is no systematic difference between Moody’s and S&P’s assigned ratings, regardless of whether generic or modified rating systems are employed. The results also indicate that when generic rating systems are used, there is no significant difference in yield premia between bonds with split ratings and bonds with equivalent ratings. Results are different, however, when modifiers are considered. Although superior and inferior S&P’s ratings (holding Moody’s ratings fixed) still do not affect the yield premium, superior ratings assigned by Moody’s (holding S&P’s fixed) do lower the interest yield premium significantly. Quarterly Journal of Business and Economics, Vol. 30, No. 1 (Winter 1991), pp. 110-127. (Reprinted with permission of the Quarterly Journal of Business and Economics.)

Published

1991-12-30

How to Cite

Perry , L. G., Evans , D. A., & Liu, P. (1991). Bond Rating Discrepancies and the Effect on Municipal Bond Yields. Financial Services Review, 1(2), 181. https://doi.org/10.1016/1057-0810(91)90043-X

Issue

Vol. 1 No. 2 (1991): Financial Services Review

Section

Abstracts of Articles on Individual Financial Management

License

Copyright (c) 1991 JAI Press Inc.

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