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

Staff working papers set out research in progress by our staff, with the aim of encouraging comments and debate.
Published on 18 April 2019

Staff Working Paper No. 792

By Richard D F Harris, Veselin Karadotchev, Rhiannon Sowerbutts and Evarist Stoja

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.

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

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