Long-term Ratings Research Articles

The Benevolence of Time, Sound Macroeconomic Environment and Governance Quality on the Duration of Sovereign Ratings Phases

Using long-term sovereign ratings data for a panel of 130 countries over the last three decades, we rely on discrete-time Weibull models to investigate the duration and determinants of sovereign ratings phases. We find that the likelihood of the end of the 'speculative-grade' phase increases as time goes by (i.e. positive duration dependence), but the 'investment-grade' phase is not duration dependent. Thus, for sovereigns rated as speculative, the build-up of reputation as good borrowers is a gradual process, whereas the reputation of investment-grade sovereigns solidifies and remains unchanged as time passes. However, the length of both phases has proven to be significantly dependent on the country's economic conditions and the quality of governance. In particular, lower inflation, better economic performance and sounder fiscal policies shorten (prolong) the speculative- (investment-) grade phase. In addition, a better perception of the quality of public services and the ability of the government to formulate and implement sound policies and regulations help to reduce the duration of speculative-grade phases.

Long Term Electrical Rating of Concentrated Photovoltaic (CPV) Systems in Singapore

Abstract Owing to the diverse photovoltaic (PV) systems available commercially, ranging from the stationary silicon-based PV panels to 2-axes tracker concentrated photovoltaic (CPV) systems and dynamic nature of meteorological data, energy planners and PV system designer require a simple but accurate methodology to understand the economic viability of a renewable solar PV plant. An electrical rating methodology is proposed for evaluating the long-term performance for assorted PV systems, providing a common “playing field” to consumers, planners and manufacturers of PV systems. Given a meteorological condition, the output-based approach or electrical rating of renewable energy system is the key for economic and environmental CO2 emission evaluations. Despite the overwhelming catalog data furnished by PV manufacturers, the long-term electricity rating of a PV system is deemed to be a quick and accurate method for the evaluation of economic viability and the determination of plant sizes and power production from a PV facility. This paper presents and analyses the long term performances, as monthly and overall electrical ratings in kWh/m2.year of two concentrated photovoltaic (CPV) prototypes, the mini dish Cassegrain-type and the Fresnel lens CPVs with triple-junction solar cells, operating under the meteorological conditions of Singapore and compares performances with the other photovoltaic systems.

The effects of sovereign credit rating spillovers on neighbouring countries’ financial markets

ABSTRACTThis study investigates the spillover effects of long-term foreign currency sovereign credit rating announcements on foreign currency-denominated bonds and stock markets in 19 African countries during the period of 1994–2014. Using a combination of Granger causality tests and impulse response function, the results show that there is marginal regional sovereign rating spillover impacts that are quickly absorbed into capital markets trading long-term securities. The analysis further shows marginal spillover effects that persist over longer time periods in sovereign ratings of other countries in the same region from a sovereign rating change in one country. These results imply that the regional bilateral linkages between countries serve as channels of capital and sovereign credit rating information flow. Thus, it is imperative for regional countries to pursue prudent developmental macroeconomic policies to avoid negative ratings that will have regional spillover effects.

South Africa's Prospects Under Cyril Ramaphosa

The African National Congress (ANC) narrowly avoided a damaging split at the recently concluded 54th national conference. South Africa is, however, firmly in a “muddling along” scenario. The result of the elections for the 86 elected members of the National Executive Committee (NEC) led by newly elected ANC President Cyril Ramaphosa reflects an organization that went into the conference sharply divided and it will take time for these divisions to subside. The recall of Jacob Zuma is one of the key decisions now confronting the NEC. The longer Zuma stays in power the better the opposition parties will do during the national and provincial elections in 2019. However, in spite of the narrow victory of Ramaphosa, Zuma and his incoherent, large cabinet may be recalled sooner rather than later to avoid a further downgrade of South Africa’s long-term local currency debt ratings. Since Ramaphosa currently serves as deputy president of South Africa and therefore is a member of cabinet the problems associated with two centers of power (between Luthuli House and the Union Buildings) in the period leading up to national and provincial elections in 2019 are manageable. However, Zuma’s announcement on fee-free education only hours before the start of the 54th Conference clearly demonstrates the potential damage that he could wreak in the months that lie ahead, particularly given his stated intention to press ahead with a hugely expensive and superfluous nuclear energy deal. The question is how rapidly the NEC will unite behind Ramaphosa to recall him. Based on the forecasts presented in Fate of the Nation it seems likely that the ANC will retain its status as governing party during the 2019 elections, with around 53% of the vote, down from 62% in 2014. Such an outcome will avert the need for a coalition at national level. The ANC could however, lose its majority in the critically important Gauteng province. Only a coalition between the Democratic Alliance and the Economic Freedom Fighters (EFF) would be able to put together a governing opposition alliance in Gauteng – a difficult and unlikely partnership given the ideological distance between these two parties. This analysis effectively makes the EFF a potential 2019 kingmaker in Gauteng. The Western Cape, the only province currently governed by an opposition party (the Democratic Alliance), will retain that status and ANC support in rural provinces will remain firm, particularly given the focus on transition of land to rural communities as announced during the conference. The win by Ramaphosa has averted a major crisis for the ANC and it may yet retain Gauteng province (in alliance with others), but it is not going to be an easy ride. The ANC will, however, eventually emerge significantly more united than at present and the outcome may save the Tripartite Alliance that includes the South African Communist Party and labour union COSATU from disbandment. In terms of its foreign relations South Africa has its work cut out to rebuild the respect and trust of others. Generally, values such as democracy, human rights and good governance have found limited expression in foreign policy under Mbeki and Zuma (the Mandela era was an aberration), and it is unlikely that this will change under a Ramaphosa government although there may be some tonal adaptation. In addition, absent structural reform in the military, South Africa’s ability to contribute to peacekeeping will continue its steady decline.

Banks’ Credit Ratings – Domestic and Foreign Notes

The aim of the paper is to analyse the differences between foreign and domestic notes given to banks by credit rating agencies. Following a literature review, the following hypothesis was proposed: Financial indicators have a stronger impact on the credit ratings of domestic rather than of foreign banks. The hypothesis was verified using panel ordered probit models. The analysis was based on European banks’ long-term issuer credit ratings given by S&P, Fitch and Moody between 2000 and 2015.

Sizing of hybrid energy storage system for a PV based microgrid through design space approach

Energy storage plays a crucial role in ensuring reliable power supply in a renewable microgrid. The supply and demand variability is found in different time scales (i.e., instantaneous, diurnal, and seasonal). The nominal discharge duration of multiple storage options can be matched effectively for variability in all relevant time scales. An optimum mix of storage options is important to design a cost-effective system.This paper proposes a generic sizing methodology using pinch analysis and design space for hybrid energy storage in a PV-based isolated power system. Pinch analysis utilises a time series simulation of the system where generation should always exceed the load. The methodology defines the design space as feasible combinations of short, medium, and long-term storage size and PV array rating for the given loads. These design space curves are approximated by quadratic equations and the correlations are used as constraints to determine the optimal mix of supply and storage that minimise the life cycle cost.Four different practical cases in Indian context —a remote village, telecom tower, welding shop, and a standby system for a lift load – are analysed to illustrate the sizing method. As an example, the optimal size for a PV based microgrid supplying a remote telecom tower with an average load of 72 kWh/day is 40 kWp of PV, 5 m3 of hydrogen storage and 58 kWh of battery. The proposed methodology extends the design space approach to obtain an optimal minimum cost solution.

Race to the Bottom? Competition Among Rating Agencies in the European Structured Debt Market – Evidence from the CRA Regulation

After analyzing the long-term credit ratings on European structured debt products before and after European Parliament’s introduction of Article 8d in June 2013, which aims to diversify the market by encouraging the use of small credit rating agencies, I find that the rating split between large and small rating agencies significantly drops. During the first half of the data sample (January 2011-May 2013) or prior to Article 8d’s introduction, the data show that the Big 3 assign on average ratings that are at least 2.5 notches more conservative than those of DBRS, the fourth-largest credit rating agency. In the second half of the data set (July 2013-May 2017) or post implementation of Article 8d, the rating split between the Big 3 and DBRS decreases by at least 1.5 notches. This implies that under heightened competition from smaller rating agencies like DBRS, the dominant credit rating agencies are more likely to engage in a “race to the bottom” and assign more lenient credit ratings to securities.

THE OBJECTIVES AND GOALS IN INVESTMENT ACTIVITIES OF OPERATING COMPANIES FOR THE OIL AND GAS INDUSTRY

This study paper is focused on the current system of investment activities conducted by operating companies for the oil and gas industry in order to highlight the key models driving the effectiveness of the investment projects. The accounting and cost models are benchmarked in terms of their analysis of the objective, methodology and selection of the object of the analysis and that includes the cost model key specifics and benefits. The cost model analysis implies highlighting market valuation of the business; therefore, the attracted resources and funds are evaluated at a specific point in time (then current) in terms of the opportunity of using fixed net worth resources and assets for continued company operations. There are different mathematical models and methods being used for assessing financial position and predicting potential of bankruptcy of companies, based on the calculation of individual financial ratios and combinations thereof. The most famous multifactor models for predicting insolvency of companies include both international (Altman Z-score two-factor; the five-factor Altman model; the four-factor Tafler and Tishaw model; the four-factor Liese model), and national (five-factor Seifullin and Kadykov model; the four-factor Irkutsk bankruptcy prediction model; the five-factor Savitskaya model) analysis models. In keeping with the cost management approach a decision-making process must be focused on value maximization across all levels of company operations management. Financial and economic performance parameters are the targeted objects ensuring that objectives for strategic effectiveness and cost management can be achieved. The use of financial model for evaluation of company’s net is also highlighted. The study paper features a balanced scorecard (BSC) developed by r. Kaplan and Norton that became the most widely-used prediction tool because this concept combines company’s long-term development assessment ratings and its current financial performance during the operations. The BSC metrics are company-specific being used to assess and measure the operating company’s activities depending on its mission, vision and strategy based on the following important factors: internal processes, customers, finances, personnel training and development.

Credit Risk-Return Puzzle: Asian Countries Representative

<p>This research investigates the presence of Credit Risk-Return Puzzle on Indonesia, China, Japan and Singapore, by analyzing the relationship between credit risk and stock return with the utilization of credit ratings from Moody’s to represent credit risk. The data comprises of monthly data from January 2001 to December 2015, compiled in an unbalanced panel and then regressed with the Hausman-Taylor Estimator due to the presence of time-invariant variables such as countries and country classifications within the dataset.</p><p>The results from this research show that Credit Risk-Return Puzzle exists in both developed and developing market for long-term credit ratings, proven by the negative relationship between stock return and credit ratings. On the other hand Credit Risk-Return Puzzle does not exist in the case of credit rating changes in terms of direction but do show some signs of existence through difference in magnitude, as different reasons underlying credit rating changes such as leverage changes can change the direction of stock price movement.</p><p> </p><p><strong>K</strong><strong>ey</strong><strong>w</strong><strong>ords</strong><strong>: </strong>credit risk-return puzzle, credit rating announcements, credit risk, impact of rating changes, decoupling-recoupling hypothesis</p>

Rating kredytowy emitenta i inwestora – porównanie wpływu determinant

The aim of the paper is to analyse European banks’ credit ratings factors. To this end, a literature review has been made about the impact of credit ratings factors and the following hypothesis has been put forward: The strength of the banks’ credit ratings factors depends on the issuer- and investor-paid notes. Thomson Reuters database has been used for the analysis. The analysis has been made by using panel data models. As a dependent variable, long-term credit ratings presented by credit rating agencies from 2000 to 2015 have been used. Credit ratings have been decomposed linearly. The study has been made using quarterly data.

The impact of credit rating as scoring methods on GCC market indexes

The aim of this paper is to investigate whether country credit rating changes announcement has a significant impact on GCC Stock Market Index. As per researcher knowledge, none has been done on the GCC. Using event study methods in estimation of the relationship between the credit rating agency Moody’s and GCC stock markets indexes over 11 years period between 2004 to Jun 2015. The sample of this study is relatively related to GCC stock markets indexes, it focuses on all the long-term country credit rating decisions by Moody’s and its impact on short-terms investments and stock markets. Moreover it considers the gap between long-terms and the short-terms investor singular events. The result of our paper indicate that the impact of credit rating agency Moody’s on GCC Stock Markets Indexes is insignificant and have no impact, taking into consideration the impact of 2008 financial crisis.

Predicting long-term product ratings based on few early ratings and user base analysis

Product reviews and ratings are major quality indicators in online shopping systems. In making the decision about carrying a product as part of their inventory, an online seller often pays attention to the product’s rating. However, when the observed average is based on a small number of individual user-submitted ratings, the decision-maker may not feel as confident about the product, even when the average is high. The long-term average rating predictions can help online retailers to identify products to promote on their websites as “top picks”. The paper proposes a Bayesian Network model to predict the long-term average product ratings based on a (limited) number of early submitted ratings. Performance of the proposed model is compared with the performance of five other prediction methods/models; a Linear Regression model, two variations of a Running Average predictor, an Ordered Logistic Regression model and a Confirmatory Factor Analysis model. Each model’s performance is evaluated using the “MovieLens” dataset (GroupLensResearch, 2012). The training is done on 56,590 data points, the ratings submitted for 1155 movies, and the prediction results are reported for 495 movies. It is demonstrated that the proposed Bayesian Network and the Linear Regression models are particularly effective in making accurate predictions around the time of product introduction when the information about the prospective, future ratings is especially valuable. The Bayesian Network model performs better in the very early stage of feedback collection, and in the later stages, as more feedback is received, the Linear Regression model emerges as the best predictor. The strengths and weaknesses of all the assessed prediction methods are discussed.

EDB Macroreview, October 2016 - Economic Recovery Trajectories in Eurasia

In recent years, positive expectations have not been met for the second half of the year regarding economic recovery in the EDB member countries. In both 2015 and 2014, unfavorable external factors, primarily the fall in oil prices, had a negative effect on the dynamics of economic growth in the region. Available data for Q3 2016 indicate a more favorable scenario. This is suggested by both macroeconomic data and leading indicators, as well as signals from international credit rating agencies. Trends in regional growth dynamics in the past several months point to the start of economic recovery. Indeed, judging by data for July-August 2016, there are grounds for positive GDP growth rates in the EDB countries in Q3 2016. To all appearances, one can also expect positive changes in inflation before the end of 2016. The inflation rate in Russia is expected to be lower than 6% in 2016. It will hit an all-time low in 2017-2018 and be close to the central bank’s target of 4%. We expect a fall in the aggregate inflation rate of the EDB countries from 12.8% in 2015 to 6.1% in 2016, and a further slowdown in the rise in consumer prices to 4.8% in 2017 and 4.2% in 2018. Apart from the low world prices on food and primary commodities, a significant contribution to the decline in inflationary pressure is delivered by the stabilization of the exchange rates of the EDB countries’ currencies throughout Q2-Q3 2016. This trend is partially due to a decline in the outflow of capital from EDB countries and makes it possible for the countries to replenish their foreign exchange reserves. An important factor for the economic recovery in a number of the EDB countries was the rise in exports, primarily to the Russian Federation. In some countries, the acceleration of the rise in exports may be attributable to the depreciation of the national currency. However, Kyrgyzstan showed an increase in exports to Russia despite the strengthening of the som against the ruble, which suggests that integration factors may have played a certain role. Despite the positive changes however, there are lingering risks of imbalances in a number of macroeconomic sectors, primarily in the budgetary sphere. There are still significant global risks related to: the slowdown in the growth of the Chinese economy; the fall in the prices of primary commodities; the deterioration of the situation in the banking sector of European countries; as well as an increase in the Fed rate.

Do sovereign rating announcements affect emerging market exchange rate correlations? A multivariate DCC-GARCH approach

ABSTRACTThis article investigates the effects of sovereign credit rating announcements on time-varying exchange rate return correlations for a sample of 11 emerging market countries over the period 2002–2015. The data set covers daily exchange rates and long-term foreign currency sovereign ratings, outlooks and watch list. The pairwise time-varying correlations are derived by corrected Dynamic Conditional Correlation (cDCC) modelling which is a member of multivariate Generalized Autoregressive Conditional Heteroskedasticity (GARCH) models family. Furthermore, to capture the global factor effect, a dynamic-weighted index is created by using dynamic principal component (DPC) analysis. Findings suggest that some of the emerging market exchange rate co-movements are affected by rating announcements. Upgrades of Moody’s and downgrades of Fitch lead to spillovers. Main source of these spillovers are sovereign credit rating changes of European countries, especially Czech Republic and Turkey. Countries with high amount of external debt, large current account deficit and speculative grade are more prone to be influenced by announcements on a foreign country’s long-term sovereign rating.

Effect of Partnership Status on Preferences for Facial Self-Resemblance.

Self-resemblance has been found to have a context-dependent effect when expressing preferences for faces. Whereas dissimilarity preference during mate choice in animals is often explained as an evolutionary adaptation to increase heterozygosity of offspring, self-resemblance can be also favored in humans, reflecting, e.g., preference for kinship cues. We performed two studies, using transformations of facial photographs to manipulate levels of resemblance with the rater, to examine the influence of self-resemblance in single vs. coupled individuals. Raters assessed facial attractiveness of other-sex and same-sex photographs according to both short-term and long-term relationship contexts. We found a preference for dissimilarity of other-sex and same-sex faces in single individuals, but no effect of self-resemblance in coupled raters. No effect of sex of participant or short-term vs. long-term attractiveness rating was observed. The results support the evolutionary interpretation that dissimilarity of other-sex faces is preferred by uncoupled individuals as an adaptive mechanism to avoid inbreeding. In contrast, lower dissimilarity preference of other-sex faces in coupled individuals may reflect suppressed attention to attractiveness cues in potential alternative partners as a relationship maintenance mechanism, and its substitution by attention to cues of kinship and psychological similarity connected with greater likelihood of prosocial behavior acquisition from such persons.

The effect of anchors on reliability of endoscopic tremor ratings.

The purpose of this study was to determine the effects of anchors and training on intrarater and inter-rater reliability for visual-perceptual, endoscopic tremor ratings. Prospective cohort study. Nasoendoscopy recordings of 10 participants with a diagnosis of essential voice tremor were evaluated by five voice specialists using the Vocal Tremor Scoring System. Ratings were performed before, immediately after, and 4 weeks after implementation of a training program with anchor stimuli. Immediate and long-term post-training ratings were performed with simultaneous use of anchor samples for each rating. Intrarater reliability showed significant improvement from pretraining to immediate and long-term post-training. Mean correlation coefficients (Spearman's rho) increased from 0.71 at pretraining to 0.84 and 0.90 at immediate and long-term post-training, respectively. Inter-rater reliability was not affected by training with anchors, with mean correlation coefficients ranging from 0.62 at pretraining to 0.58 and 0.64 at immediate and long-term post-training, respectively. Consistent, reproducible ratings are critical for the interpretation and comparison of endoscopic tremor data. Reliability findings from this study indicate that the use of anchor samples as referents for making ordinal judgments about the severity of tremor in oropharyngeal and laryngeal regions was helpful for improving internal standards and consistency but less useful for calibrating across different raters. 4 Laryngoscope, 2016 127:411-416, 2017.

Electrical Rating of Concentrated Photovoltaic (CPV) Systems: Long-Term Performance Analysis and Comparison to Conventional PV Systems

The dynamic nature of meteorological data and the commercial availability of diverse photovoltaic systems, ranging from single-junction silicon-based PV panels to concentrated photovoltaic (CPV) systems utilizing multi-junction solar cells and a two-axis solar tracker, demand a simple but accurate methodology for energy planners and PV system designers to understand the economic feasibility of photovoltaic or renewable energy systems. In this paper, an electrical rating methodology is proposed that provides a common playing field for planners, consumers and PV manufacturers to evaluate the long-term performance of photovoltaic systems, as long-term electricity rating is deemed to be a quick and accurate method to evaluate economic viability and determine plant sizes and photovoltaic system power production. A long-term performance analysis based on monthly and electrical ratings (in kWh/m 2 /year) of two developed CPV prototypes, the Cassegrain mini dish and Fresnel lens CPVs with triplejunction solar cells operating under the meteorological conditions of Singapore, is presented in this paper. Performances are compared to other conventional photovoltaic systems.

Impact of sovereign rating changes on stock market co-movements: the case of Latin America

ABSTRACTWe aim to determine if long-term foreign currency sovereign rating assessments (from S&P, Moody’s and Fitch) for the advanced emerging Latin American countries (Brazil, Mexico and Chile) have any significant effect on the correlation between their stock market returns in the last decade. With that purpose in mind, we obtain the time-varying correlation by cDCC modeling using ARX-APARCH filtered returns. The analysis shows that the rating changes do not have a significant effect on the correlations in general. After testing for robustness, we reveal that an upgrade to an investment grade level for a country is more likely to positively diversify it from others in the region instead of creating a common positive regional investment environment. Results have important implications for investors and policymakers.

Solicited and Unsolicited Credit Ratings: A Global Perspective

The authors conducted a global study of the long-term issuer ratings of nonfinancial firms from Standard and Poor's Ratings Services (S&P) for the period 1998–2003. Specifically, they focused on the solicited versus unsolicited ratings and sample-selection bias in the analysis. Unlike the literature, they adopted an improved method using Wooldridge’s instrumental-variable approach to mitigate the concern of specification errors in Heckman’s model. They found that the probability of seeking a long-term issuer rating is positively related to the size and profitability of the firm, and negatively related to the growth opportunities and debt levels of the firm. The credit rating is positively related to the sovereign rating, size, and profitability of the issuer, and negatively related to the debt ratio of the issuer. Consistent with the literature, they found sample-selection bias in credit ratings. Their findings suggest that the firms with solicited ratings seem to be more profitable, more liquid, and have lower leverage than the issuers with unsolicited ratings. After controlling for sample-selection bias and some key financial ratios, they found that unsolicited firms, on average, seem to have lower long-term issuer ratings.

Men's perception of women's dance movements depends on mating context, but not men's sociosexual orientation

We investigated the influence of mating context and sociosexual orientation (interest in sex without emotional involvement) on men's perceptions of women's dance movements. One hundred men aged 18 to 33 (M=23.5, SD=3.5) years viewed brief videos of five “high attractive” and five “low attractive” female dancers (aged 18 to 22years; M=19.8, SD=1.2) from a sample of 84 motion-captured dancers, and judged them on promiscuity and movement harmony. Additionally, half the participants judged the dancers on attractiveness as a long-term mate and the other half on attractiveness as a short-term mate. Men were more attracted to high attractive dancers than to low attractive dancers and judged them higher on attractiveness when choosing as a potential short-term mate. In addition, high attractive dancers were rated higher than low attractive dancers on promiscuity and movement harmony. Specifically, promiscuity judgments predicted men's short-term attractiveness ratings, whereas movement harmony judgments predicted long-term attractiveness ratings. Men's sociosexual orientation did not influence perceptions of female dance movements. Results are discussed with reference to trade-offs in time and energy expenditure on child rearing in men's mate preferences, corroborating the hypothesis that women's body movements inform on these qualities.