Giacomo Nocera

Do investors care about credit ratings? An analysis through the cycle

We investigate how the credit cycle affects the link between bond spreads and credit ratings. Using a simple model of the credit assessment process, we show that when the debt market is more opaque, the information content of ratings deteriorates, creating an incentive for investors to increase the amount spent on private information. We test this hypothesis empirically. Results show that when market opaqueness (proxied by the spread between Aaa- and Baa-rated bonds) increases, the explanatory power of ratings and other control variables deteriorates as investors increasingly price in non-public information.

Do Investors Care About Credit Ratings? An Analysis Through the Cycle

We investigate how the link between bond spreads and credit ratings is affected by the credit cycle. Using a simple model of the credit assessment process, we show that when the debt market is more opaque, the information content of ratings becomes poorer, creating an incentive for investors to increase the amount spent on private information. We test this hypothesis empirically. Results show that, when market opaqueness (proxied by the spread between Aaa and Baa-rated bonds) increases, the explanatory power of ratings and other control variables becomes poorer, as investors increasingly price in non-public information.

Multiattribute Assessment of the Financial Performance of Non-life Insurance Companies: Empirical Evidence from Europe

The European insurance market has undergone major changes over the past couple of decades, which have created new opportunities but also a lot of challenges and threats for insurers in Europe. In this study, we focus on non-life insurance companies in Europe, over the period 2000–2012, and employ a data-driven multidimensional approach to assess their financial performance, taking into account profitability, solvency, and operating performance indicators. The assessment isolates country-specific effects and, through a second-stage explanatory analysis, we examine the impact of country differences with respect to their economic status and the features of their insurance markets.

Experience and Brokerage in Asset Markets: Evidence from Art Auctions

Focusing on the art market, where auction houses act as brokers between art sellers and buyers, we investigate whether more experienced brokers achieve better performance as information providers. We use a unique data set of auctions of Italian paintings in various houses around the world, and we measure experience as the number of times an auctioneer has auctioned the artworks of a certain artist in a given location. We find that more experienced auction houses (i) are more likely to sell and (ii) provide more precise pre-sale estimates. These findings suggest that experience plays an important role for brokers to reduce illiquidity and opacity in markets with asymmetric information.