Nabar, Prafulla G Park, Sang Yong Saunders, Anthony
Abstract
This article analyzes the impact of prime rate changes on stock prices of prime rate change initiating banks relative to noninitiating banks. The prime rate as a "sticky price" is analyzed, and the potential directions (and sizes) of information effects are discussed and empirically examined. It is found that prime rate increases generally convey bad news about the initiating banks. Prime rate decreases, in contrast, have weakly positive effects on the initiating banks. Prime rate change announcements are also found to have some effect on banks other than the initiating bank, implying that contagion effects exist. Copyright 1993 by University of Chicago Press.
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Article provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 66 (1993) Issue (Month): 1 (January) Pages: 69-92 Download reference. The following formats are available: HTML
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