## On the Information Content of Ldc Secondary Loan Market Prices

_IMF Working Papers, February 1, 1991_

## Source details

**Canonical URL:** [On the Information Content of Ldc Secondary Loan Market Prices](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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## Bibliographic details
- Authors: Mark R. Stone
- Published: February 1, 1991
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451843781.001

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### Summary and main finding
- 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.

### Methods and data
- 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.

### Policy implications and interpretation
- 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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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/on-the-information-content-of-ldc-secondary-loan-market-prices-896_