Sovereign credit ratings fail to predict crises, sparking market turmoil.
The article "Rating the Rating Agencies" looks at how well credit ratings predict financial crises and whether they react to crises after they happen. The researchers also explore how financial markets might predict crises. They found that credit ratings are not very good at anticipating crises and tend to react to them instead. This suggests that financial markets may be better at predicting crises than credit ratings.