Market reactions to the ECB's Comprehensive Assessment

Using an event study approach, we examine financial markets’ reactions to the publication of the ECB’s Comprehensive Assessment of banks in the euro area. Our results suggest that banks’ stock market prices and CDS spreads generally did not react to the publication of the results of the Comprehensive Assessment. This conclusion also holds for banks with a capital shortfall. Only for banks in some countries do we find weak evidence for (mixed) effects on stock prices, while CDS spreads for German banks declined.
 
Keywords: ECB Comprehensive Assessment, stress tests, bank equity returns, CDS Spreads.
JEL classifications: G21, G28.

Working paper no. 463