{
  "title": "On the Information Content of Ldc Secondary Loan Market Prices",
  "publication": "IMF Working Papers, February 1, 1991",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/on-the-information-content-of-ldc-secondary-loan-market-prices-896",
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  "summary": "This note examines the impact of measurable and unmeasurable (not correlated with observed aggregates) information on secondary market LDC loan prices. The Institutional Investor country risk ratings are used to construct a proxy for the non-quantifiable information that moves debt market values.",
  "sections": [
    {
      "heading": "Summary and main finding",
      "content": "- The note examines the impact of measurable and unmeasurable (not correlated with observed aggregates) information on secondary market LDC loan prices.\n- Institutional Investor country risk ratings are used to construct a proxy for the non-quantifiable information that moves debt market values.\n- Regression results indicate that market participants use both macroeconomic aggregates and unmeasurable information to price LDC loans.\n- Implication: price changes unrelated to observables need not raise concerns regarding price reliability; such price movements may be conveying important information not quantified elsewhere."
    },
    {
      "heading": "Methods and data",
      "content": "- Proxy for unmeasurable information: Institutional Investor country risk ratings.\n- Empirical approach: regression analysis linking secondary market LDC loan prices to macroeconomic aggregates and the constructed proxy for non-quantifiable information.\n- Focus: distinguishing the roles of observed macroeconomic aggregates versus information not correlated with observed aggregates in loan pricing."
    },
    {
      "heading": "Policy implications and interpretation",
      "content": "- Price movements in LDC secondary loan markets that are unrelated to observable aggregates are not necessarily unreliable.\n- Such movements can reflect valuable, non-quantified information used by market participants when pricing debt.\n- Users of loan price data should recognize that unobservable information (as proxied by risk ratings) can be a legitimate driver of price variation.\n\n---\n\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/on-the-information-content-of-ldc-secondary-loan-market-prices-896"
    }
  ],
  "bullets": [
    "[Markdown version](/en/publications/wp/issues/2016/12/30/on-the-information-content-of-ldc-secondary-loan-market-prices-896/index.md)",
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    "Authors: Mark R. Stone",
    "Published: February 1, 1991",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451843781.001",
    "The note examines the impact of measurable and unmeasurable (not correlated with observed aggregates) information on secondary market LDC loan prices.",
    "Institutional Investor country risk ratings are used to construct a proxy for the non-quantifiable information that moves debt market values.",
    "Regression results indicate that market participants use both macroeconomic aggregates and unmeasurable information to price LDC loans.",
    "Implication: price changes unrelated to observables need not raise concerns regarding price reliability; such price movements may be conveying important information not quantified elsewhere.",
    "Proxy for unmeasurable information: Institutional Investor country risk ratings.",
    "Empirical approach: regression analysis linking secondary market LDC loan prices to macroeconomic aggregates and the constructed proxy for non-quantifiable information.",
    "Focus: distinguishing the roles of observed macroeconomic aggregates versus information not correlated with observed aggregates in loan pricing.",
    "Price movements in LDC secondary loan markets that are unrelated to observable aggregates are not necessarily unreliable.",
    "Such movements can reflect valuable, non-quantified information used by market participants when pricing debt.",
    "Users of loan price data should recognize that unobservable information (as proxied by risk ratings) can be a legitimate driver of price variation."
  ],
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