This is the program for the 2010 Joint Statistical Meetings in Vancouver, British Columbia.

Abstract Details

Abstract - #308123
Title: WITHDRAWN: Testing the Markov Assumption Using Corporate Credit Ratings
Author(s): Jenna Rice and Nicole Bader
Keywords: macroeconomic ; Markov ; corporate ; bonds ; ratings ; transition

Since the early 1900s agencies like Standard and Poor's have developed corporate rating systems to evaluate the quality of investments. Investors have come to rely upon these ratings when purchasing corporate bonds. Our team used historical credit ratings data, from 1981-2002, along with macroeconomic variables to create a predictive ratings model. When creating the model, we used the Markov assumption that only the initial rating was necessary to determine the probability that a rating would transition over a specific period of time. We are testing the validity of the Markov assumption since it does not take into account ratings momentum. By determining whether or not the Markov assumption is valid, we will be able to determine the best model for corporate credit ratings.

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