Have FSRs Got News for You? Evidence from the Impact of Financial Stability Reports on Market Activity

32 Pages Posted: 24 Apr 2019

See all articles by Richard D. F. Harris

Richard D. F. Harris

University of Exeter - Business School; University of Exeter

Veselin Karadotchev

Bank of England

Rhiannon Sowerbutts

Bank of England

Evarist Stoja

University of Bristol

Date Written: April 18, 2019

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.

Keywords: Event Studies, Financial Stability Reports, Central Bank Communication, Market Reaction

JEL Classification: G14, G18, G21, G22, G23, G24

Suggested Citation

Harris, Richard D. F. and Karadotchev, Veselin and Sowerbutts, Rhiannon and Stoja, Evarist, Have FSRs Got News for You? Evidence from the Impact of Financial Stability Reports on Market Activity (April 18, 2019). Bank of England Working Paper No. 792 (2019). Available at SSRN: https://ssrn.com/abstract=3376524 or http://dx.doi.org/10.2139/ssrn.3376524

Richard D. F. Harris

University of Exeter - Business School ( email )

Streatham Court
Xfi Building, Rennes Dr.
Exeter, EX4 4JH
United Kingdom

University of Exeter ( email )

Northcote House
The Queen's Drive
Exeter, Devon EX4 4QJ
United Kingdom

Veselin Karadotchev (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Rhiannon Sowerbutts

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Evarist Stoja

University of Bristol ( email )

School of Economics, Finance and Management
8 Woodland Road
Bristol, BS8 1TN
United Kingdom

HOME PAGE: http://sites.google.com/view/evarist-stoja/

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