The calculation of average credit rating using ratings from three rating agencies

I was doing something in Finance and wanted to calculate the average rounded credit rating. Basically, I need to translate textual grades (e.g., AAA, Baa) to a numerical value. I found a clue in the following paper:

Becker, B., and T. Milbourn. 2011. How did increased competition affect credit ratings? Journal of Financial Economics 101 (3):493-514.

See their Table 2 for an overview of the ratings levels for the three main rating agencies and the numerical value assignments used in their empirical work.

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1 Response to The calculation of average credit rating using ratings from three rating agencies

  1. Shuo Wang says:

    Dear Kai:

    My name is Shuo Wang and I am an assistant professor of accounting in the university of Groningen. I am really impressed by your blog as I learn a lot from your codes.

    For the numerical value of credit ratings I have some different saying from Becker. I would like to use 21 for AAA, 18_20 for AA, 15-19 for A, 12-14 for BBB, 9-11 for B.B., 6-8 for B, 3-5 for CCC, 2 for CC, 1 for C, and -1 for D.

    My research interest also include credit ratings. Hope we can exchange ideas in the future!

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