Is There News in the Prime Rate?

Myron B. Slovin, Marie E. Sushka and Edward R. Waller

Journal of Financial and Quantitative Analysis, 1994, vol. 29, issue 4, 633-646

Abstract: Using intraday data, we find that bank announcements of changes in the prime rate have significant effects on Dow Jones stock price indexes and yields in the Treasury bill futures market. We find comparable effects using daily data for indexes of share prices of banks and financial firms as well as interest rates on various maturities of government securities. Our evidence is consistent with the view that banks have a comparative advantage in processing private information gained through bank-borrower relations and the regulatory supervision process.

Date: 1994
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