Banking stress test effects on returns and risks

Cenkhan Sahin, Jakob de Haan and Ekaterina Neretina

Journal of Banking & Finance, 2020, vol. 117, issue C

Abstract: We investigate the effects of the announcement and the disclosure of the clarification, methodology, and outcomes of the U.S. banking stress tests on banks’ equity prices, credit risk, systematic risk, and systemic risk. We find evidence that stress tests have moved stock and credit markets following the disclosure of stress test results. We also find that banks’ systematic risk, as measured by betas, declined in nearly all years after the publication of stress test results. Our evidence suggests that stress tests affect systemic risk.

Keywords: Stress tests; Bank equity returns; CDS Spreads; Systematic risk; Systemic risk (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:117:y:2020:i:c:s0378426620301096

DOI: 10.1016/j.jbankfin.2020.105843

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