Stock Markets and Stress Test Announcements: Evidence from European Banks

Christos Floros (), Efstathios Karpouzis and Nikolaos Daskalakis
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Christos Floros: Department of Accounting and Finance, School of Management and Economics Sciences, Hellenic Mediterranean University, 71410 Heraklion, Greece
Efstathios Karpouzis: Department of Banking and Financial Management, School of Finance and Statistics, Piraeus University, 18534 Piraeus, Greece
Nikolaos Daskalakis: Department of Public Administration, School of Economy and Public Administration, Panteion University, 17671 Athens, Greece

Economies, 2024, vol. 12, issue 7, 1-11

Abstract: This paper examines the market reaction to the European bank stress test announcement and results release events. Using event study methodology (calculating abnormal returns on a three-day period around the event dates), we find that the market reacts differently between the announcement event and the results release event. We also show that the market seems to positively overreact one day before each event, and that this positive reaction is either fully or partially reversed one day after the event. We thus conclude that researchers should consider both events when exploring the market reaction to stress-testing exercises.

Keywords: stock markets; stress test announcements; European banks; event-study methodology; Central Banks (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2024
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