Evaluating the information in the federal reserve stress tests

Mark Flannery, Beverly Hirtle and Anna Kovner

Journal of Financial Intermediation, 2017, vol. 29, issue C, 1-18

Abstract: We present evidence that the Federal Reserve stress tests produce information about both the stress-tested bank holding companies and the overall state of the banking industry. Our evidence goes beyond a standard event study, which cannot differentiate between small abnormal returns and large, but opposite-signed, abnormal stock returns. We find that stress test disclosures are associated with significantly higher absolute abnormal returns, as well as higher abnormal trading volume. More levered and riskier holding companies seem to be more affected by the stress test information. We find no evidence that stress test disclosures have reduced the production of private information. After disclosure begins, stress tested firms attract equity analysts without changing analysts’ forecast dispersions or their mean forecast error.

Keywords: Stress testing; Banking; Financial crises; Disclosure; Information asymmetry (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (78)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1042957316300274
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Evaluating the information in the Federal Reserve stress tests (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinin:v:29:y:2017:i:c:p:1-18

DOI: 10.1016/j.jfi.2016.08.001

Access Statistics for this article

Journal of Financial Intermediation is currently edited by Elu von Thadden

More articles in Journal of Financial Intermediation from Elsevier
Bibliographic data for series maintained by Catherine Liu ().