What has been the observed price performance offallen angels after they have been downgraded?

What will be an ideal response?

A "fallen angel" is bond that was once investment grade but has since been reduced to junk bond status due to downgrades. Studies have observed that fallen angels outperform peer high-yield bonds two years after the downgrade announcement. The amount of outperformance after two years was found by Dor and Xu to be a total of 6.63%.

NOTE: There can be negative consequences that may offset the superior price performance. For example, if the portfolio manager is not forced to sell the position in a fallen angel, there are two adverse consequences. First, the fallen angel becomes an out-of-index holding and this will adversely impact the portfolio's tracking error. Second, for insurance companies, regulations mandate that capital reserves be increased because there are higher capital reserves required for noninvestment-grade bonds than for investment-grade bonds.