March Madness in Wall Street: (What) Does the Market Learn from Stress Tests?

Marcelo Fernandes, Deniz Igan and Marcelo Pinheiro
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Marcelo Pinheiro: PCAOB

No 771, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: Annual stress tests have become a regular part of the supervisors' toolkit following the global financial crisis. We investigate their capital market implications in the United States by looking at price and trade reactions, information asymmetry and uncertainty indicators, and bank activities. The evidence we present supports the notion that there is important new information in stress tests, especially at times of financial distress. Moreover, public disclosure seem to help reduce informational asymmetries. Importantly, public disclosure of stress test results (and methodology) does not seem to have reduced private incentives to generate information or to have led to distorted incentives.

Keywords: Stress testing; Capital requirements; Public disclosure; Information (search for similar items in EconPapers)
JEL-codes: G14 G28 G32 (search for similar items in EconPapers)
Date: 2015-12-20
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Citations: View citations in EconPapers (10)

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Related works:
Journal Article: March madness in Wall Street: (What) does the market learn from stress tests? (2020)
Working Paper: March Madness in Wall Street: (What) Does the Market Learn from Stress Tests? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:qmw:qmwecw:771

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