ビジネス＆財務ジャーナル

Sovereign Credit Rating Changes and its Impact on Financial Markets of Europe During Debt Crisis Period (Greece, Ireland)

Abstract

Masood O, Bashir F and Sahi AI

The purpose of this study is to examine the impact of sovereign credit rating changes on financial markets using database of two countries (Greece, Ireland) in the European union over the period March 2008-Dec 2015. By analyzing the influence of sovereign credit rating on bond market yield, we also examine the correlation between sovereign credit rating and bond market yield of each country during crisis period. Quarterly basis data of all variables is used in the research. By using regression analysis with Durbin Watson test and Pearson correlation for each country financial markets the findings indicated that sovereign credit rating has a significant impact on bond markets. Sovereign ratings are negatively correlated with Bond yield in both countries. The finding summarized that credit rating has a major influence on financial markets during crisis period.