How Did Markets React to Stress Tests?

We use event study methods to compare the market reaction to U.S. and EU-wide stress tests performed from 2009 to 2013. Typically, stress tests have a positive impact on stressed banks' returns. While the 2009 U.S. stress test had a large positive outcome, the impact of subsequent U.S. exercise...

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Main Author: Candelon, Bertrand
Other Authors: Sy, Amadou N.R.
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2015, 2015
Series:IMF Working Papers; Working Paper
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Summary:We use event study methods to compare the market reaction to U.S. and EU-wide stress tests performed from 2009 to 2013. Typically, stress tests have a positive impact on stressed banks' returns. While the 2009 U.S. stress test had a large positive outcome, the impact of subsequent U.S. exercises decreased over time. The 2011 EU exercise is the only EU-wide stress test that resulted in a significant negative market reaction. Comparing past exercises suggests that the qualitative aspects of the governance of stress tests can matter more for stock market participants than technical elements, such as the level of the minimum capital adequacy threshold or the extent of data disclosure
Physical Description:21 p.
ISBN:9781484315378
1484315375