VGSF - WU Vienna - LC

Stephen G. Ryan, NYU Stern

11:00 - 12:30

Organizer VGSF

Change of loca­tion!

Please note that this talk will take place at Raif­feisen Forum, Friedrich-Wil­helm-Raif­feis­en-­Platz 1, 1020 Wien (www.raif­feis­en-­forum.at).

It is part of the con­fer­ence „After the Crisis is Be­fore the Crisis“ (www.oefg.at/events/arge-fin­an­zkrise-­ab­schlusskon­fer­en­z-160/)

As part of the ser­ies of the "Fin­ance Re­search Sem­inar", VGSF wel­comes Stephen G. Ryan from NYU Stern to present his re­search pa­per.
Per­sonal Webpage

Pa­per

As­set-­Level Trans­par­ency and the (E)valu­ation of As­set-­Backed Se­cur­it­ies

The Dod­d-­Frank Act man­dates dis­clos­ure of in­form­a­tion about the in­di­vidual as­sets un­derly­ing as­set-­backed se­cur­it­ies (“ABS”). Ef­fect­ive Novem­ber 23, 2016, Reg­u­la­tion AB II re­quires is­suers of cer­tain types of ABS to dis­close in­form­a­tion about each un­derly­ing as­set. We ex­am­ine how these as­set-­level dis­clos­ures af­fect the (e)valu­ation of ABS by in­vestors and credit rat­ing agen­cies. Us­ing a dif­fer­ence-in-dif­fer­ences ap­proach that com­pares af­fected and un­af­fected types of ABS, we find that as­set-­level dis­clos­ures lead to (1) ini­tial ABS yield spreads and credit rat­ings that bet­ter pre­dict the sub­sequent per­form­ance of the un­derly­ing as­sets and (2) in­creased in­vestor re­li­ance on rat­ings. These ef­fects oc­cur sharply around the com­pli­ance date of the dis­clos­ure re­quire­ments. The in­creased in­form­at­ive­ness of yield spreads is con­sist­ent with as­set-­level trans­par­ency im­prov­ing in­vestors’ valu­ation of ABS. Be­cause credit rat­ing agen­cies did not change their meth­od­o­lo­gies or re­li­ance on as­set-­level in­form­a­tion around Reg­u­la­tion AB II, pub­lic as­set-­level dis­clos­ures ap­pear either to dis­cip­line the agen­cies’ evalu­ation of ABS or to in­crease their use of ABS price-re­lated in­form­a­tion. Our primary res­ults are con­cen­trated in deals with above-­me­dian risk lay­er­ing in the un­derly­ing as­sets, for which pool-­level dis­clos­ures are less in­form­at­ive, and with above-­me­dian com­plex­ity in the tranch­ing of credit risk.



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