Using comprehensive data on U.S. corporate bond trades since 2002, we find that retail bond investors over-rely on untimely credit ratings, neglect firm fundamentals, and appear to misunderstand the trade-off between bond risk and yields. Specifically, retail investors appear to select bonds by...

Two factors have proven to be strongly relevant for the subprime mortgage crisis. The first is the lack of screening incentives of originators, which had not been anticipated by investors. The second is that investors relied too much on credit ratings. We examine whether investors have learned...

Using institutional equity trading data, we find that a set of small institutional investors consistently follow credit ratings issued by an investor-paid rating agency in their trading decisions. Although rating information is credit related, we find that these followers often respond more...

We test whether ratings are comparable across asset classes over a 30-year sample. We examine default rates by initial rating, accuracy ratios, migration metrics, instantaneous upgrade and downgrade intensities, and rating changes over bonds' entire lives in multivariate regressions. These...

This paper investigates whether bond fund managers with credit rating experience outperform their peers. We document that bond fund managers who previously worked in credit rat- ing agencies on average create higher risk-adjusted returns than their peers by 11-16 bps per month, with better...

Two factors have proven to be strongly relevant for the subprime mortgage crisis. The first is the lack of screening incentives of originators, which had not been anticipated by investors. The second is that investors relied too much on credit ratings. We examine whether investors have learned...

Innovations in statistical technology have sparked concerns about distributional impacts across categories such as race and gender. Theoretically, as statistical technology improves, distributional consequences depend on how changes in functional forms interact with cross-category distributions...