TY  - JOUR
AU  - He,Jie (Jack)
AU  - Qian,Jun 'QJ'
AU  - Strahan,Philip E.
TI  - Are All Ratings Created Equal? The Impact of Issuer Size on the Pricing of Mortgage-backed Securities
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17238
PY  - 2011
Y2  - July 2011
UR  - http://www.nber.org/papers/w17238
L1  - http://www.nber.org/papers/w17238.pdf
N1  - Author contact info:
Jie He
University of Georgia
Terry College of Business
Department of Banking and Finance
424 Brooks Hall
Athens, GA 30602
E-Mail: jiehe@uga.edu

Jun Qian
Boston College
140 Commonwealth Ave
Chestnut Hill, MA 02467
E-Mail: qianju@bc.edu

Philip Strahan
Carroll School of Management
324B Fulton Hall
Boston College
Chestnut Hill, MA  02467
Tel: 617/552-6430
E-Mail: philip.strahan@bc.edu
AB  - We examine whether rating agencies (Moody’s, S&P, and Fitch) reward large issuers of mortgage-backed securities, who bring substantial business, by granting them unduly favorable ratings.  The initial yield on both AAA-rated and non-AAA rated tranches sold by large issuers is higher than that on similar tranches sold by small issuers during the market boom years of 2004-2006.   Moreover, the prices of MBS sold by large issuers drop more than those sold by small issuers, and the differences are concentrated among tranches issued during 2004-2006.  We conclude that large issuers receive more favorable ratings and that the market prices the risk of inflated ratings, especially during booming periods.
ER  -