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Does credit rating constitute an advice to the investors to buy?

April 26, 2017advice buy constitute Credit rating investors

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Does credit rating constitute an advice to the investors to buy?

1 Answer

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10 Posted

It does not. The reason is that some factors, which are of significance to an investor in arriving at an investment decision, are not taken into account by rating agencies. These include reasonableness of the issue price or the coupon rate, secondary market liquidity and pre-payment risk. Further, different investors have different views regarding the level of risk to be taken and rating agencies can only express their views on the relative credit risk.