 Do stress tests matter? A study on the impact of the disclosure of stress test results on European financial stocks and CDS marketsCarlos Alves, Victor Mendes and Paulo Silva Applied Economics, 2015, vol. 47, issue 12, 1213-1229 Abstract: During the recent sovereign debt crisis, the European Banking Authority conducted two stress tests on European banks in order to gauge their capital needs, core Tier-1 ratios and ratios of resilience to adverse shocks. We assess the informational content of the disclosure of the stress test outcomes. We conclude that the stress tests conveyed new information and that the outcomes were not anticipated by the stock market but were partially anticipated by the credit default swap (CDS) market. However, while the stock market reacted to the disclosure of the stress test outcomes, in the CDS market there is some evidence of a 'reverse' reaction. Moreover, the publication of the outcomes of the stress tests had a stronger impact on the stock prices of riskier financial institutions. A similar pattern is evident in the CDS market, albeit narrowed to one of the stress tests and amid the financial institutions with higher perceived credit risk. Date: 2015 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:taf:applec:v:47:y:2015:i:12:p:1213-1229 Ordering information: This journal article can be ordered from DOI: 10.1080/00036846.2014.993132 Access Statistics for this article Applied Economics is currently edited by Anita Phillips More articles in Applied Economics from Taylor & Francis Journals |
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