Joint rating announcements by the three leading agencies: An analysis of realized volatility in Asian FX markets

This study examines the effects of the sovereign rating changes by the three leading agencies, Standard and Poor´s, Moody´s and Fitch on realized foreign exchange market volatility in the Asian markets over a period of 1997-2001. Specifically, we investigate whether there are differences in FX market reaction following a single rating change announcement by one agency or a joint rating announcement by different combinations of the agencies or the three agencies together. We find that as far as the single ratings are concerned, Standard and Poor´s seems to provide a stronger market reaction than Moody´s and Fitch. Further, when there are multiple agency rating changes, the market reaction following single or joint ratings is similar. Finally, there is a tendency for realised volatility to increase as a function of the number of rating events.