In a recent report that compares the quality of corporate ratings given in continental Europe and the US by Moody's, the rating agency, it is shown that ratings in continental Europe were found to be more accurate than their north American counterparts. The European ratings, according to the report, are more efficient in ranking default risk in absolute terms and relative to market-based credit measures, specifically in the one-year and three-year horizons.
For the period 1999-2003, European accuracy ratios exceeded American accuracy ratios by 15.8% and 23.5% over the one-year and three-year periods. The correlation between ratings and spreads was also greater for the European ratings
Richard Cantor, a managing director in the credit policy group at Moody's comments: ?A little more than half of these wide differences appear to reflect a more transparent risk environment in Europe. In particular, during 1999-2003 (when we have bond-implied rating information available), the bond market also appeared to do a better job predicting default risk in Europe than in America.?
Moody's found that ratings stability in the Europe and America were largely similar, though noted that European ratings exhibited slightly more stability by virtue of the greater proportion of investment-grade credits in Europe relative to north America.