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FDIC Working Papers Series

Table 2
Stock Price and Return Characteristics by Quarter Preceding Downgrade in CAMEL Rating

The data reported on each of the quarter-to-rating change lines (-8 to 0) are calculated as simple averages for all trading days in each quarter. If data required for any quarterly calculation are missing, then they are omitted from the calculation. Excess returns are calculated as the difference between the cumulative quarterly return of each stock and the cumulative quarterly return of the various indexes. T-statistics testing the hypothesis that the mean equals zero are shown below many of the quarterly average return and change in return statistics. A single, double, or triple "*" indicates significance at the 10%, 5%, and 1% levels, respectively.
A) Trends Preceding Downgrade to 3
Qtrs
To
Rating
Change
Sample Avg.
Stock
Price
($)
Change
Stock
Price
($)
Avg.
Daily
Trading
Volume
(shares)
Avg. Qtrly.
Turnover
Ratio
(%)
Cum.
Qtrly.
Return
(%)
St. Dev.
Daily
Return
(%)
Change
St. Dev.
Daily
Return
(%)
CRSP
Eq. Wt.
Excess
Return
(%)
CRSP
Va. Wt.
Excess
Return
(%)
Industry
Va. Wt.
Excess
Return
(%)
-8 116 14.67 0.07
0.38
13,050 17.03 3.11
1.83 *
2.43 -0.06
-0.68
-2.61
-1.77 *
-1.07
0.74
-0.64
-0.44
-7 121 14.43 -0.22
-1.03
10,760 15.36 -1.13
-0.82
2.46 0.02
0.24
-4.93
-4.05 ***
-4.56
-3.71 ***
-3.20
-2.65 *
-6 122 13.80 -0.65
-2.58 ***
12,538 15.09 -1.82
-1.23
2.59 0.14
1.41
-0.06
-5.16 ***
-0.05
-4.32 ***
-0.04
-3.10 ***
-5 126 12.75 -0.94
-2.10 ***
10,106 13.79 -1.47
-0.92
2.60 0.04
0.42
-5.67
-4.48 ***
-5.19
-3.73 ***
-3.15
-2.43 **
-4 126 12.30 -0.45
-2.67 ***
10,675 14.28 -1.16
-0.70
2.88 0.28
2.53 **
-5.52
-3.87 ***
-3.81
-2.58 **
-3.63
-2.34 **
-3 125 11.95 -0.39
-2.08 **
12,023 15.70 -1.63
-0.90
3.08 0.19
1.85 *
-4.82
-3.12 ***
-3.88
-2.39 **
-2.05
-1.32
-2 124 11.63 -0.36
-2.46 **
11,657 14.68 -2.70
-1.30
3.38 0.30
2.51 ***
-6.95
-3.93 ***
-4.76
-2.55 ***
-3.08
-1.70 *
-1 123 10.71 -0.94
-4.92 ***
12,343 16.30 -3.91
-1.96 *
3.86 0.46
3.28 ***
-8.94
-5.52 ***
-6.78
-3.78 ***
-7.25
-4.50 ***
0 122 10.12 -0.56<
-2.69 ***
12,480 16.49 -3.18
-1.37
4.05 0.18
1.25
-11.07
-5.96 ***
-6.69
-3.17 ***
-8.07
-3.99 ***
B) Trends Preceding Downgrade to 4 or 5
Qtrs
To
Rating
Change
Sample Avg.
Stock
Price
($)
Change
Stock
Price
($)
Avg.
Daily
Trading
Volume
(shares)
Avg. Qtrly.
Turnover
Ratio
(%)
Cum.
Qtrly.
Return
(%)
St. Dev.
Daily
Return
(%)
Change
St. Dev.
Daily
Return
(%)
CRSP
Eq. Wt.
Excess
Return
(%)
CRSP
Va. Wt.
Excess
Return
(%)
Industry
Va. Wt.
Excess
Return
(%)
-8 148 11.09 -0.33
-2.20 **
10,715 14.72 0.20
0.13
2.92 0.02
0.18
-4.55
-3.78 ***
-3.37
-2.61 **
-2.23
-1.83 *
-7 152 10.72 -0.36
-2.66 ***
11,335 12.93 -3.09
-2.12 **
3.06 0.16
1.46
-5.79
-4.50 ***
-5.31
-4.05 ***
-3.76
-2.82 ***
-6 151 10.40 -0.33
-2.62 ***
9,469 13.95 -2.22
-1.43
3.08 0.03
0.23
-0.06
-4.82 ***
-0.06
-3.90 ***
-0.04
-3.18 ***
-5 154 9.85 -0.53
-4.73 ***
9,560 12.72 -4.69
-3.23 ***
3.45 0.39
2.67 ***
-9.57
-6.67 ***
-8.17
-6.06 ***
-7.17
-5.23 ***
-4 154 9.45 -0.40
-2.90 ***
9,311 12.82 -6.13
-3.86 ***
3.53 0.08
0.63
-11.77
-8.38 ***
-10.56
-7.43 ***
-10.46
-7.52 ***
-3 151 8.66 -0.84
-6.13 ***
9,956 13.45 -6.37
-3.18 ***
4.08 0.65
4.39 ***
-11.15
-6.70 ***
-10.00
-5.44 ***
-8.74
-5.05 ***
-2 150 7.79 -0.84
-5.73 ***
9,932 13.05 -8.46
-4.26 *
4.89 0.81
2.62 ***
-13.26
-7.65 ***
-11.53
-6.00 ***
-10.73
-5.77 ***
-1 149 6.83 -0.97
-6.89 ***
10,246 13.51 -6.29
-2.00 **
5.79 0.88
2.86 ***
-12.69
-4.61 ***
-9.53
-3.18 ***
-9.65
-3.41 ***
0 148 5.97 -0.90
-6.88 ***
10,684 13.20 -11.72
-4.04 ***
5.87 0.82
3.04 ***
-17.15
-6.73 ***
-13.72
-4.95 ***
-14.01
-5.38 ***

Last Updated 03/01/2002 insurance-research@fdic.gov