Emerging Countries Sovereign Rating Adjustment using Market Information: Impact on Financial Institutions Investment Decisions

URL des Documents de travail : http://ces.univ-paris1.fr/cesdp/cesdp2013.html Publié comme chapitre dans "Emerging Markets and the Global Econom: A Handbook" Eds. El Hedi Arouri, M. and Boubaker, S. and Nguyen, D.K., Academic Press, 2013Documents de travail du Centre d'Economie de la Sorbonne 2013.34 - ISSN : 1955-611XAssets, debts and other financial products issued by emerging countries are usually considered more speculative than those issued by developed economies. Therefore, relying on traditional rating agencies to invest in these countries is problematic as the information used to assess the economic and market condition in these economies is quickly outdated. Consequently, both the investment opportunities and the necessity to clear particular positions may be missed, respectively resulting in potential significant costs of opportunity or losses. Therefore, an approach taking into account the latest information displayed by financial markets may enable us bypassing the traditional limits. As a result, this chapter proposes a creditworthiness evaluation methodology based on adjusting ratings obtained from macroeconomic fundamentals (GDP growth rate, inflation, external debts, etc.) and financial market movements (bonds, equity volume, volatility, etc). In the first step, a general panel model is applied on country-specific information to generate fundamental ratings. In the second step, applying a multi-factor model to market indicators and breaking down long-term sovereign bond yields into different risk premia, market implied ratings are obtained. Finally, the rating to be considered (denoted "δ-Rating") for investment purposes is a combination of fundamental ratings and market implied ratings carrying out an adapted Bühlmann-Straub method (Credibility Theory). Then, emerging countries "δ-Rating" will be compared to those obtained from developed countries and discussed against financial institutions risk appetite.Les produits financiers émis par les pays émergents sont généralement considérés plus spéculatifs que ceux émis par les économies développées. Se baser sur les agences de notation traditionnelles pour investir dans ces pays est donc problématique, car les informations utilisées seront obsolètes. En conséquence, une approche différente est nécessaire pour évaluer ces pays. Ce papier propose une méthodologie d'évaluation de la solvabilité basée sur l'ajustement des notes obtenues à partir des fondamentaux macroéconomiques (taux de croissance du PIB, l'inflation, dette extérieure, etc.) et les mouvements des marchés financiers (obligations, actions, la volatilité de volume, etc.). On utilise tout d'abord un modèle de panel général puis un modèle multifactoriel. La note à prendre en considération (noté "delta-notes") à des fins d'investissement est une combinaison de notes fondamentales et d'évaluations de marché implicites