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FDIC Working Papers Series

Table 5
Stock Price and Return Characteristics by Quarter after Downgrade in CAMEL Rating: Subsequent Recovery
The data reported on each of the quarter-to-rating change lines (0 to 8) 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 Following Downgrade to 3: Subsequent Recovery
Qtrs
After
Rating
Change		 Sample Avg.
Stock
Price
($)		 Change
Stock
Price
($)		 Avg.
Daily
Trading
Volume
(shares)		 Avg. Qtrly
Turnover
Ratio
(%)		 Cum.
Qtrly.
Retun
(%)		 St. Dev.
Daily
Return
(%)		 Change
St. Dev.
Daily
Return
(%)		 CRSP
Eq. Wt.
Excess
Return
(%)		 CRSP
Va. Wt.
Excess
Return
(%)		 Industry
Va. Wt.
Excess
Return
(%)
0 54 10.99 -0.32
-1.47		 10,946 17.49 0.40
0.10		 4.25 0.11
0.47		 -8.96
-2.86 ***		 -2.22
-0.60		 -4.24
-1.21
1 54 10.58 -0.41
-1.66 *		 7,922 14.46 1.01
0.39		 4.18 -0.06
-0.23		 -5.42
-2.02 **		 -1.29
-0.49		 -3.97
-1.41
2 53 10.60 0.08
0.30		 7,412 13.37 9.87
2.14 **		 4.33 0.07
0.32		 -3.97
-0.88		 3.62
0.80		 -2.34
-0.52
3 53 11.56 0.95
3.43		 7,855 14.74 2.28
0.86		 4.06 -0.27
-1.55		 -10.08
-4.06 ***		 -2.34
-0.90		 -6.77
 **
4 52 11.90 0.37
1.66 *		 8,722 14.04 9.89
2.52 **		 4.81 0.69
1.02		 -1.39
-0.36		 6.92
1.67 *		 2.67
0.64
5 52 12.62 0.71
2.31 ***		 7,539 12.44 19.92
2.02 **		 5.04 0.23
0.66		 11.33
1.16		 16.28
1.67 *		 12.77
1.31
6 51 14.30 1.44
4.67 ***		 8,635 15.68 15.92
4.55 ***		 3.72 -0.15
-0.87		 4.57
1.46		 13.52
3.81 ***		 11.22
3.20 ***
7 51 15.13 0.83
2.52 ***		 7,941 13.80 7.22
2.63 ***		 3.14 -0.58
-2.81 ***		 -2.82
-1.03		 4.85
1.77 *		 2.03
0.75
8 48 14.97 0.89
3.68 ***		 8,101 13.32 12.58
4.36 ***		 3.31 0.06
0.37		 3.29
1.17		 9.94
3.67 ***		 6.84
2.54 **
B) Trends Following Downgrade to 4 or 5: Subsequent Recovery
Qtrs
After
Rating
Change		 Sample Avg.
Stock
Price
($)		 Change
Stock
Price
($)		 Avg.
Daily
Trading
Volume
(shares)		 Avg. Qtrly
Turnover
Ratio
(%)		 Cum.
Qtrly.
Retun
(%)		 St. Dev.
Daily
Return
(%)		 Change
St. Dev.
Daily
Return
(%)		 CRSP
Eq. Wt.
Excess
Return
(%)		 CRSP
Va. Wt.
Excess
Return
(%)		 Industry
Va. Wt.
Excess
Return
(%)
0 94 6.66
-3.33 ***		 -0.52 8,681 10.63
-1.11		 -4.07 5.00 0.05
0.20		 -11.46
-3.48 ***		 -6.36
-1.82 *		 -8.58
-2.55 **
1 94 6.07 -0.60
-3.91 ***		 9,323 11.59 -7.10
-2.12 **		 6.05 1.05
2.97 ***		 -14.35
-4.40 ***		 -9.87
-2.94 ***		 -11.90
-3.50 ***
2 94 5.81 -0.22
-1.24		 10,674 12.09 5.44
1.34		 6.65 0.56
2.10 **		 -5.75
-1.60		 1.17
0.29		 -3.32
-0.84
3 94 5.90 0.05
0.32		 9,950 11.01 6.54
1.27		 7.06 0.47
0.73		 -7.13
-1.48		 1.89
0.36		 -3.48
-0.66
4 92 6.20 0.23
1.63		 10,691 13.04 14.86
2.70 ***		 6.62 0.08
0.24		 3.08
0.57		 11.46
2.08 **		 6.60
1.19
5 89 5.89 0.09
0.64		 12,485 12.67 5.30
1.44		 6.89 0.10
0.28		 -5.19
-1.44		 1.72
0.46		 -2.06
-0.54
6 88 6.35 0.52
3.00 ***		 15,859 15.00 15.30
3.79 ***		 6.86 -0.10
-0.24		 2.21
0.59		 11.43
2.77 ***		 6.88
1.67 *
7 87 7.26 0.94
5.00 ***		 19,709 18.22 18.95
4.55 ***		 6.39 -0.53
-1.54		 7.34
1.82		 16.33
3.90 ***		 11.30
2.71 ***
8 87 7.81 0.56
3.94 ***		 20,665 14.08 13.04
2.43		 5.99 -0.40
-1.15		 3.59
0.70		 11.12
2.06 **		 8.03
1.50

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