Global Advanced Research Journal of Management and Business Studies (ISSN: 2315-5086) December 2016 Vol. 5(10), pp 332-338

Copyright © 2016 Global Advanced Research Journals   


Original Research Articles

Sovereign Credit Rating Changes and its Impact on Financial markets of Europe during debt Crisis Period (Greece, Ireland, Portugal, Spain & Italy)

Omar Masood1 and Kiran Javeria2

1Director, Quaid-i-Azam School of Management Sciences, Quaid-i-Azam University,Islamabad, 45320, Pakistan, Email:

2Quaid-i-Azam School of Management Sciences, Quaid-I-Azam University, Islamabad

Accepted 11 December 2016


The purpose of this study is to examine the impact of sovereign credit rating changes on financial markets using database of five countries (Greece, Ireland, Portugal, Spain and Italy) covering the major regions in the European union over the period March,2008- Dec, 2015. In general researcher examines sovereign rating impact in stock and bond markets during Euro-zone debt crisis period. First to check the impact of sovereign rating on stock markets returns and researcher also investigate the correlation between credit rating and stock markets returns of each country during the crisis period. Second to check the influence of sovereign credit rating on bond market yield and researcher also examine the correlation between sovereign credit rating & bond market yield of each country during crisis period. For better result three moderating variable inflation, GDP real index and current account to GDP% which are considered as determinants of sovereign credit rating as a moderating variable in the research .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 stock markets of all countries except Portugal. The findings regarding stock markets also states that there is positive correlation among sovereign credit rating and stock markets returns. Stock markets shows negative return in case of rating downgrades. In bond market ten year bond yield reaction is examined due to sovereign rating announcements. The finding shows that regression models are more significant in all countries in case of bond markets. The finding summarized that credit rating has a major influence on financial markets during crisis period. This study is useful for investors, policy maker and Govt. to rebalance their portfolios across member countries and provide reliable picture of financial markets in distress period. The Study is also beneficial for all regulatory bodies like Basel Committee who mostly depend upon Sovereign Credit ratings for their regulatory regimes.

Keywords: Sovereign credit rating, Stock markets, Bond yield, Euro-zone debt crisis, Inflation, GDP real index and Current amount of GDP%



Related Articles

Original Research Articles
Seyyed Mohammad Naser Mobarghai
Transition from penal logic to insurance logic in criminal policy (a new contribution of reparative justice)
Glo. Adv. Res. J. Manage. Bus. Stud. March 2013 Vol: 2(2): - [Abstract] [Full Text - PDF] (132 KB)
NJIMANTED Godfrey Forgha, NGWENGEH Brendaline Beloke, Mbohjim Othniel MOBIT
An Assessment of the Determinants of Financial Market Development in Cameroon
Glo. Adv. Res. J. Manage. Bus. Stud. March 2016 Vol: 4(1): - [Abstract] [Full Text - PDF] (162 KB)
Alexandre da Silva de Oliveira
An essay on floating exchange rate policy in Brazil
Glo. Adv. Res. J. Manage. Bus. Stud. December 2017 Vol: 5(1): - [Abstract] [Full Text - PDF] (197 KB)
Ini Solomon Udom and Eze Onyekachi Richard
Implications Of Stock Market Efficiency On Nigerian Manufacturing Sector Performance 1985 To 2017
Glo. Adv. Res. J. Manage. Bus. Stud. March 2019 Vol: 8(2): - [Abstract] [Full Text - PDF] (302 KB)
Ayeni Raphael Kolade
Macroeconomic Determinants of Private Sector Investment An Ardl Approach Evidence from Nigeria
Glo. Adv. Res. J. Manage. Bus. Stud. February 2014 Vol: 3(2): - [Abstract] [Full Text - PDF] (131 KB)
Vincent N, Ojeh and Origho Thaddeus
Socioeconomic Development of Rural Areas in Nigeria Using the Growth Pole Approach: A Case Study of Delta State University in Abraka.
Glo. Adv. Res. J. Manage. Bus. Stud. April 2012 Vol: 1(1): - [Abstract] [Full Text - PDF] (774 KB)

Current Issue

Viewing Options

View Full Article - PDF
Download Full Article - PDF

Search for Articles

Omar Masood on Google Scholar
Omar Masood on Pubmed
Kiran Javeria on Google Scholar
Kiran Javeria on Pubmed


Viewed 2355
Printed 1762
Downloaded 1205
Powered By iPortal Works