This paper examines the relationship between sovereign credit default swaps CDS and sovereign rating changes of European countries. To this aim, a new estimator is introduced which merges mixed data sampling MIDAS with probit regression. Simulations show that the estimator has good properties in...

This paper investigates empirically the behavior of Credit Rating Agencies CRAs when assessingsovereign solvency for European countries. Using Probit regressions I find that even after controllingfor macroeconomic factors, CRAs take the business cycle into account. Also, there is a clear case...