Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/100532
Authors: 
Rafael Weißbach, Rafael
Voß, Sebastian
Year of Publication: 
2014
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2014: Evidenzbasierte Wirtschaftspolitik - Session: Econometric Theory C20-V3
Abstract: 
We model credit rating histories as continuous-time discrete-state Markov processes. Infrequent monitoring of the debtors' solvency will result in erroneous observations of the rating transition times, and consequently in biased parameter estimates. We develop a score test against such measurement errors in the transition data that is independent of the error distribution. We derive the asymptotic chi-square distribution for the test statistic under the null by stochastic limit theory. The test is applied to an international corporate portfolio, while accounting for economic and debtor-specific covariates. The test indicates that measurement errors in the transition times are a real problem in practice.
JEL: 
C41
C52
G33
Document Type: 
Conference Paper

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