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The Impact of the Frequency of Credit Ratings Changes on Stock Return Volatility: Evidence from the S&P 500

Yan, Ying LU and Nguyen, Anh Thu LU (2025) NEKN02 20251
Department of Economics
Abstract
This study investigates the relationship between the frequency of credit ratings changes and stock return volatility using a dataset of publicly listed U.S. firms with annual credit ratings from the past ten years to construct both cross-sectional and panel datasets across different time windows. The main empirical approach of this thesis is fixed effects panel regression with clustered estimator, and results consistently show a positive and statistically significant association between the frequency of credit ratings changes and stock return volatility. Through using categorical variables, directional subsamples to validate the findings, we find the key driver in credit ratings changes’ impact on volatility is rating downgrades. This... (More)
This study investigates the relationship between the frequency of credit ratings changes and stock return volatility using a dataset of publicly listed U.S. firms with annual credit ratings from the past ten years to construct both cross-sectional and panel datasets across different time windows. The main empirical approach of this thesis is fixed effects panel regression with clustered estimator, and results consistently show a positive and statistically significant association between the frequency of credit ratings changes and stock return volatility. Through using categorical variables, directional subsamples to validate the findings, we find the key driver in credit ratings changes’ impact on volatility is rating downgrades. This study contributes to the literature by highlighting the long-term implications of credit ratings activity and points to future research opportunities in the area of information persistence. (Less)
Please use this url to cite or link to this publication:
author
Yan, Ying LU and Nguyen, Anh Thu LU
supervisor
organization
course
NEKN02 20251
year
type
H1 - Master's Degree (One Year)
subject
keywords
credit rating, volatility, frequency
language
English
id
9193704
date added to LUP
2025-09-12 10:46:55
date last changed
2025-09-12 10:46:55
@misc{9193704,
  abstract     = {{This study investigates the relationship between the frequency of credit ratings changes and stock return volatility using a dataset of publicly listed U.S. firms with annual credit ratings from the past ten years to construct both cross-sectional and panel datasets across different time windows. The main empirical approach of this thesis is fixed effects panel regression with clustered estimator, and results consistently show a positive and statistically significant association between the frequency of credit ratings changes and stock return volatility. Through using categorical variables, directional subsamples to validate the findings, we find the key driver in credit ratings changes’ impact on volatility is rating downgrades. This study contributes to the literature by highlighting the long-term implications of credit ratings activity and points to future research opportunities in the area of information persistence.}},
  author       = {{Yan, Ying and Nguyen, Anh Thu}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The Impact of the Frequency of Credit Ratings Changes on Stock Return Volatility: Evidence from the S&P 500}},
  year         = {{2025}},
}