Full Disclosure and Financial Stability: How Does the Market Digest the Transparency Shock?

46 Pages Posted: 2 May 2016

See all articles by Fausto Pacicco

Fausto Pacicco

LIUC - Università Cattaneo

Luigi Vena

LIUC - Università Cattaneo

Andrea Venegoni

LIUC Università Cattaneo

Date Written: May 2, 2016

Abstract

Since macro-prudential stress tests have become the main instruments of the supervisory authorities toolkit, the debate on the effect of their results disclosure inflamed. Our work aims at providing a framework that, via a dynamic estimation of the betas, allows to observe the impact of the new information flow on the stability of the banking system. What we find is that, contrary to literature wisdom, almost all banks betas decrease, as the transparency shock contributes to an overall systemic risk drop.

Keywords: Disclosure Policy, Stress Test, State-Space Model, Market Reaction, Risk Assessment

JEL Classification: C32, G12, G14, G28

Suggested Citation

Pacicco, Fausto and Vena, Luigi and Venegoni, Andrea, Full Disclosure and Financial Stability: How Does the Market Digest the Transparency Shock? (May 2, 2016). Available at SSRN: https://ssrn.com/abstract=2773669 or http://dx.doi.org/10.2139/ssrn.2773669

Fausto Pacicco

LIUC - Università Cattaneo ( email )

Corso Matteotti
Castellanza (VA)
Italy

Luigi Vena (Contact Author)

LIUC - Università Cattaneo ( email )

Corso Matteotti
Castellanza (VA)
Italy

Andrea Venegoni

LIUC Università Cattaneo ( email )

Corso Matteotti
Castellanza (VA)
Italy

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