Do rating grades convey important information: German evidence?

In this paper we investigate the impact of credit rating changes on German stock market. We evaluate daily abnormal stock returns of companies listed on the Frankfurt Stock Exchange (HDAX). Rating upgrades and downgrades are made by three rating agencies: Moody's, Standard and Poor's, and Fitch Ratings. We find that rating announcements are largely anticipated, i.e. German market adjusts stock prices long before the rating changes have been made. Additionally, we report that the market, along with anticipating the rating change, reacts stronger to downgrades compared to upgrades.