Dutch say US stress tests produced ‘valuable information’
Researchers find that stress tests can help ‘mitigate’ bank opacity
Stress tests conducted in the United States in the wake of the financial crisis produced "valuable information" for market participants and "can play a role in mitigating bank opacity", according to a working paper published by the Netherlands Bank last week.
Banking Stress Test Effects on Returns and Risks investigates how the disclosure of the clarification, methodology and outcomes of the stress tests impacted stock returns and credit defaults swap (CDS) spreads.
The authors, Ekaterina Neretina, Cenkhan Sahin and Jakob de Haan, find the tests "strongly" affected the CDS market, but had "less impact" on bank stock returns. "We find only weak evidence that stress tests after 2009 affected equity returns of large US banks," they said.
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