 How Did Markets React to Stress Tests?Bertrand Candelon and Amadou Sy No 2015/075, IMF Working Papers from International Monetary Fund Abstract: 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. Keywords: WP; bank; market; abnormal returns; EU 2010; financial stability; macroprudential; stress tests; EU exercise; recapitalization exercise; EU bank; EU capital exercise; EU capitalization exercise; EU recapitalization; EU entity; EU recapitalization exercise; Stress testing; Macroprudential stress testing; Capital adequacy requirements; Europe (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2015/075 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC. |
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