KC Federal Reserve Bank study:
Direct excerpts and conclusions
"Overall, it is robustly the case that S&P's re-grades moved in the direction of EJR's earlier ratings. It appears more likely that this result reflects systematic differences between the two firms rating policies than a small number of lucky guesses by EJR."
"A comparison between S&P's and EJR's ratings shows that, conditional on S&P's upgrading or downgrading a firm, its new grade was correlated with the grade EJR had awarded at least ten weeks earlier. This suggests that S&P defines its ratings more widely in terms of default probabilities than EJR."
"It also suggests that S&P's large downgrades do not occur immediately after negative surprises to firms, but rather after a steady accumulation of bad news which EJR's ratings previously reflected".
"S&P ratings converge toward Egan-Jones Ratings". Richard Johnson.
An Examination of Rating Agencies' Around The Investment Grade Boundary
An Examination of Ratings Agencies Actions Around The Investment Grade Boundary. Richard Johnson, Research Division, Federal Reserve Bank of Kansas City, Feb 2003, RWP030.
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Ongoing long term studies by the Graduate Schools of Business of Stanford University and The University of Michigan confirm:
Credit ratings from Egan-Jones more accurately reflect information in the marketplace and are frequently up to 237 days ahead of actions taken by Moody's and S&P.
The powerful market incentives resulting from the investor supported, independent business model of Egan-Jones Ratings Company produces more timely and accurate ratings with predictive value.
Differential Timing and Accuracy in the Ratings of Certified vs. Non-Certified Bond Rating Agencies
William H Beaver, Graduate School of Business, Stanford University, Stanford Ca 94305, Catherine Shakespere, Mark T. Soliman, University of Michigan, Ann Arbor Mi. 48109. First version 2003, Second version, June 2006.