Information value of EU-wide stress tests: How did the market react to stress test results?

• Autor(a) principal: Alves, Ricardo Jorge Santos
• Data de Publicação: 2013
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10071/9900
• topic: Stress-tests; Opacity; Event-study; EBA; Testes de stress; Opacidade; Estudo de casos; ABE

In last several years the world has been facing a tremendous financial crisis which had its highlight with Lehman Brothers bankruptcy in 2008. Also Europe has been struggling with sovereign debt crisis from countries such as Ireland, Greece, Portugal, and Spain leading to weakness the whole European banking system. Therefore, regulatory entities likely European Commission or European Banking Authority had to supervise more clearly, and efficiency the whole European system banking. In order to do so and coordinated with other financial and banking entities they conducted stress tests to financial institutions between 2009 and 2011. The aim of this dissertation is to assess if the stress tests conducted only in 2010 and 2011 had impact on financial markets. For that was constituted a portfolio of 49 banks, selected under certain criteria, and afterward portfolio returns were subjected to statistical tests using event study standard methods. Also the variation before and after tests release of individual volatility of 18 banks were analyzed. The obtained results were conclusive for 2010 disclosure and inconclusive for 2011 disclosure. No markets reaction in 2010. In 2011 are not possible to point out that the analyzed variations occurred due to stress tests disclosure, revealing markets caution on understanding and judge the results.