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Aswath Damodaran: Ratings agency changes often lag market reality

Aswath Damodaran: Ratings agency changes often lag market reality
Country ratings changes may lag reality

Aswath Damodaran, Kerschner Family Chair in Finance Education; Professor of Finance at New York University Stern School of Business, states that ratings agencies evaluate country default risk by assigning ratings.

Damodaran observes that while these ratings generally correlate with actual default risk, agencies can be slow to adjust, and ratings changes may not reflect real-time developments.

Damodaran has previously updated his mid-year equity risk premiums by country, factoring in both default and market risk from a 4.17 percent base. His analysis in prior reports focuses on how country risk affects these premiums. The approach provides a quantitative framework for evaluating risk alongside ratings agency assessments.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.

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