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Have FSRs got news for you? Evidence from the impact of Financial Stability Reports on market activity

Author

Listed:
  • Harris, Richard

    (Xfi Centre for Finance and Investment, University of Exeter)

  • Karadotchev, Veselin

    (Bank of England)

  • Sowerbutts, Rhiannon

    (Bank of England)

  • Stoja, Evarist

    (School of Economics, Finance and Management, University of Bristol)

Abstract

We investigate the impact that the publication of the Bank of England’s Financial Stability Report (FSR) has on the stock returns and credit default swap spreads of UK financial institutions. Examining a sample of 73 UK-listed banks and other financial institutions, we find that publication of the FSR is, on average, associated with no abnormal returns. We extend our analysis to examine the extent to which policies and the sentiment in the FSR are predictable, which would explain the observed lack of abnormal returns. We find that both sentiment and announced policies are predictable. We also examine the extent to which the release of the FSR reduces information asymmetry in financial markets, but do not find strong evidence.

Suggested Citation

  • Harris, Richard & Karadotchev, Veselin & Sowerbutts, Rhiannon & Stoja, Evarist, 2019. "Have FSRs got news for you? Evidence from the impact of Financial Stability Reports on market activity," Bank of England working papers 792, Bank of England.
    • Handle: RePEc:boe:boeewp:0792
    as

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    References listed on IDEAS

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    Cited by:

    1. Stijn Claessens & Ricardo Correa & Juan M. Londono, 2021. "Financial Stability Governance and Central Bank Communications," International Finance Discussion Papers 1328, Board of Governors of the Federal Reserve System (U.S.).
    2. Beutel, Johannes & Metiu, Norbert & Stockerl, Valentin, 2021. "Toothless tiger with claws? Financial stability communication, expectations, and risk-taking," Journal of Monetary Economics, Elsevier, vol. 120(C), pages 53-69.

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    More about this item

    Keywords

    Event studies; Financial Stability Reports; central bank communication; market reaction.;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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