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FDIC Working Papers Series

Table 6
Stock Price and Return Characteristics by Quarter after Downgrade in CAMEL Rating: Subsequent Distress

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 Distress
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 68 9.43 -0.75
-2.28 **
13,699 15.70 -6.03
-2.28 **
3.90 0.24
1.30
-12.75
-5.74 ***
-10.23
-4.39 ***
-11.11
-4.85 ***
1 68 8.68 -0.74
-3.32 ***
15,037 16.74 -10.85
-3.02 ***
4.36 0.47
2.02 **
-15.95
-5.68 ***
-14.38
-4.34 ***
-13.20
-4.28 ***
2 67 7.29 -1.32
-3.76 ***
14,715 16.82 -9.16
-2.51 **
5.49 1.08
3.32 *
-14.67
-4.88 ***
-12.19
-3.57 ***
-12.27
-4.04 ***
3 67 6.45 -0.83
-3.62 ***
14,393 15.64 -8.73
-2.26 **
6.66 1.16
1.76 ***
-17.24
-4.96 ***
-13.80
-3.67 ***
-15.86
-4.38 ***
4 66 5.87 -0.50
-2.30 **
15,945 15.49 -3.27
-0.60
7.19 0.47
0.72
-11.67
-2.42 **
-6.14
-1.18
-6.94
-1.37
5 64 5.65 -0.39
-1.58
19,325 17.27 -7.68
-1.33
7.05 1.37
1.88 ***
-13.30
-2.35 **
-9.58
-1.66 *
-11.34
-1.99 **
6 63 5.34 -0.38
-2.33 **
15,724 14.09 -4.92
-0.89
7.69 0.71
1.38
-15.83
-3.19 ***
-9.46
-1.72 *
-13.04
-2.44 **
7 61 4.87 -0.16
-0.89
18,531 14.49 3.14
0.47
8.66 0.77
1.27
-7.40
-1.24
-0.11
-0.02
-4.00
-0.61
8 58 4.69 0.00
0.00
20,009 15.13 12.86
1.57
7.75 -0.33
-0.44
2.06
0.27
9.96
1.22
5.53
0.68
B) Trends Following Downgrade to 4 or 5: Subsequent Distress
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 4.78 -1.57
-7.53 ***
14,170 17.68 -25.03
-5.97 ***
7.41 2.18
3.86 *
-27.06
-7.39 ***
-26.52
-6.63 ***
-23.46
-6.23 ***
1 50 3.22 -1.73
-8.40 ***
15,113 16.68 -32.47
-8.36 ***
10.55 3.04
3.28 *
-38.01
-11.76 ***
-34.95
-9.76 ***
-34.07
-10.33 ***
2 49 2.33 -0.91
-5.91 ***
12,270 16.38 -25.62
-4.50 ***
12.57 2.07
2.02 **
-32.19
-6.63 ***
-28.00
-5.32 ***
-29.66
-5.97 ***
3 48 1.79 -0.55
-5.95 ***
13,135 14.69 -0.36
-0.03
13.94 1.37
0.98
-8.64
-0.75
-4.22
-0.35
-6.23
-0.53
4 43 1.42 -0.50
-5.47 ***
11,557 13.10 -19.68
-2.10 **
17.00 4.42
2.38 **
-32.61
-4.00 ***
-24.64
-2.72 ***
-30.07
-3.49 ***
5 33 1.26 -0.35
-3.37 ***
8,148 9.10 2.80
0.23
16.54 1.50
0.82
-9.77
-0.84
-2.24
-0.18
-7.65
-0.62
6 21 1.32 -0.30
-2.47 **
8,791 8.57 -8.67
-0.64
16.86 2.95
1.65
-20.08
-1.56
-11.80
-0.89
-16.09
-1.23
7 17 1.06 -0.42
-3.02 ***
9,704 10.35 -31.28
-4.10 ***
15.33 1.84
0.94
-39.97
-4.63 ***
-34.13
-4.30 ***
-37.35
-4.65 ***
8 15 0.81 -0.35
-2.81 ***
10,404 12.00 -15.99
-1.23
18.47 3.32
1.38
-27.56
-2.23 **
-18.83
-1.39
-21.71
-1.59

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