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Market Perceptions of US and European Policy Actions Around the Subprime Crisis

Yoichi Otsubo (), Theoharry Grammatikos () and Thorsten Lehnert

LSF Research Working Paper Series from Luxembourg School of Finance, University of Luxembourg

Abstract: This paper explores the impacts of key policy actions by US and European authorities on stock returns of systemically important banks in Europe and US around the subprime crisis. We find that the US policy announcements had a stronger impact on the European and US banking industry than the European policy announcements. In particular, the announcements of monetary policies and financial sector policies by the US authorities were accompanied by higher abnormal returns compared to related announcements of European authorities while the announcements of the US liability guarantees had the most favorable impact on the banking stock returns during the crisis. The lead role of US policies compared to European policies was strengthened after the collapse of Lehman brothers. We also find that the policy announcements, regardless of which side of the Atlantic the news arrived from, has increased the return volatility during the crisis. Our results lend additional support to the literature documenting eventinduced volatility increases. "Keywords:""Event study; Policy Announcement; Subprime crisis;"""

JEL-codes: G01 G14 G18 G21 G28 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-cba and nep-fmk
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http://wwwen.uni.lu/content/download/54717/649118/ ... is%202012%20(14).pdf (application/pdf)

Related works:
Journal Article: Market perceptions of US and European policy actions around the subprime crisis (2015) Downloads
Working Paper: Market Perceptions of US and European Policy Actions Around the Subprime Crisis (2014) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:crf:wpaper:12-14

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