Bond ratings: A poor predictor of equity risk

How accurate are bond ratings in identifying other companies that have similar equity risk? Research reveals a flaw in using bond ratings as the sole criteria. The cost of equity marks one of the thorniest issues facing regulators when determining utility prices. The well known Bluefield and Hope decisions by the US Supreme Court force regulators to set rates that, among other things, will provide the regulated utility company with a rate of return comparable to that earned by companies with similar risk.