The Information Content of Stress Test Announcements

Luca Guerrieri and Michele Modugno

No 2021-012, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We exploit institutional features of the U.S. banking stress tests to disentangle different types of information garnered by market participants when the stress test results are released. By examining the reaction of different asset prices, we find evidence that market participants value the stress test announcements not only for the information on possible future capital distributions but also for the signals about bank resilience. These results back the use of stress tests by central banks to inform the broader public about the soundness of the banking system.

Keywords: Stress tests; Event study; Banks; Overnight stock returns; CDS spreads (search for similar items in EconPapers)
JEL-codes: E58 G21 (search for similar items in EconPapers)
Pages: 20 p.
Date: 2021-02-24
New Economics Papers: this item is included in nep-ban and nep-cba
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The information content of stress test announcements (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2021-12

DOI: 10.17016/FEDS.2021.012

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