Sovereign debt and CRAs: Where does the power lie?

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Management from the NOVA – School of Business and Economics

This work project analyzes how changes in sovereign debt rating within Europe can affect the stock performance of the event country, and wich are the factors that influence this impact. We found a significant impact made in both positive and negative watchlisting, while upgrades entail a significant downward reaction when they are preceded by watchlist activity. A further analysis of this impact allowed us to identify a surprise effect, composed by the presence of warning, the level of discussion and whether other agencies previously implemented the same action. Assuming the semistrong form of market efficiency holds, these findings suggestCRAs are considered to disclose provate information.