SOVEREIGN RATING DYNAMIC AND CAPITAL MARKET: ANALYTICAL PERSPECTIVE AT THE LEVEL OF THE CEE COUNTRIES

We analyze the effects of Standard and Poor's sovereign rating changes on stock market return at the level of the Central and Eastern Europe area. We remark a certain differentiation in terms of stock market indices reaction to sovereign rating dynamic. We assume that sovereign rating upgrade is associated with stock market return increase while a downgrade triggers an opposite phenomenon. This assumption is not validated at the general level. The differentiation can be made according to the direction of the credit rating dynamic within the rating matrix; there may be performed upgrades/downgrades within the same rating class, from one credit quality step to the other (Poland and Slovakia) as well as from one rating class to the other (Bulgaria, Romania, Hungary). A notch upgrade/downgrade within the same rating class has a different impact on investors' perception in comparison with rating class dynamics.