Skip to main content
Log in

The Value of Information: The Impact of European Union Bank Stress Tests on Stock Markets

International Advances in Economic Research Aims and scope Submit manuscript


We tested whether the 2010, 2011 and 2014 European Union bank stress tests produced useful and real information to the market. Using an augmented capital asset pricing model, we analyzed the impact of the information disclosures on each stress test (announcement, methodology and results events) on the stock market returns and risk of banks. Our approach allows an integrated analysis, as a sample of 41 banks that participated in all three stress tests was used. The most significant event was the methodology disclosure, in terms of its impact on risk and returns. In contrast, the results events did not have much impact in the stock market when considering the entire sample of banks. On the other hand, after dividing the sample of banks into two groups (those that passed the 2014 European Union stress test vs. those that failed), we observed a significant reaction of the stock markets in both groups. These findings are consistent with the hypothesis that stress tests provide real and valuable information to the markets about the banking system. A significant part of that information is conveyed by announcement and methodology events.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions


  1. The sample includes 41 banks: Allied Irish Banks plc, Alpha Bank SA, Bank of Cyprus Public Company Ltd., Bank of Valetta plc, Bankinter SA, Barclays plc, Banco Bilbao Vizcaya Argentaria SA, Banco Comercial Português SA, BNP Paribas, Banco BPI SA, Commerzbank AG, Groupe Crédit Agricole, Danske Bank, Deutsche Bank AG, Dexia NV, Erste Goup Bank AG, Eurobank Ergasias SA, HSBC Holdings plc, ING Bank NV, Intensa SanPaolo S.p.A., Jyske Bank, KBC Group NV, Lloyds Banking Group plc, Banca Monte dei Paschi di Siena S.p.A., National Bank of Greece SA, Nordea Banck AB, OTP Bank Ltd., Piraeus Bank, SA, PKO Bank Polski, Banco Popolare – Società Cooperativa, Banco Popular Español SA, Royal Bank of Scotland plc, Banco de Sabadell SA, Banco Santander SA, Svenska Handelsbanken AB, Société Générale, Skandinaviska Enskilda Banken AB, Swedbank AB, Sydbank, UBI and Unicredit S.p.A..

  2. The banks included in our sample, that failed the 2014 EU stress test, were: Bank of Cyprus Public Company Ltd., Banco Comercial Português SA, Dexia NV, Eurobank Ergasias SA, Banca Monte dei Paschi di Siena S.p.A., National Bank of Greece SA, Piraeus Bank SA and Banco Popolare – Società Cooperativa.


  • Alves, C., Mendes, V., & Silva, P. (2015). Do stress tests matter? A study on the impact of the disclosure of stress test results on European financial stocks and CDS markets. Applied Economics, 47(12), 1213–1229.

    Article  Google Scholar 

  • Apergis, N., & Payne, J. (2013). European banking authority stress tests and bank failure: Evidence from credit risk and macroeconomic factors. Banking & Finance Review, 5(2), 23–32.

    Google Scholar 

  • Bird, A., Karolyi, S., Ruchti, T. and Sudbury, A. (2019). Bias and the Efficacy of Stress Test Disclosures (July 3, 2019).

  • Bloomberg L.P. (2017) [Online]. Available at: Subscription Service (Accessed: 5 March 2017).

  • Candelon, B. and Sy, A. (2015) How Did Markets React to Stress Tests? IMF working papers, working paper no. 15/75.

    Article  Google Scholar 

  • Cardinali, A. and Nordmark, J. (2011). How informative are bank stress tests? - Bank opacity in the European Union. Lund University.

  • Cornett, M., Minnick, K., Schorno, P., & Tehranian, H. (2018). An examination of bank behavior around Federal Reserve stress tests. Journal of Financial Intermediation.

  • Dowd, K. (2015). Central bank stress tests: Mad, bad and dangerous. Cato Journal, 35(3), 507–524.

    Google Scholar 

  • Ellahie, A. (2013). Capital Market Consequences of EU Bank Stress Tests.

  • Fernandes, M., Igan, D., & Pinheiro, M. (2017). March madness in Wall Street: (what) does the market learn from stress tests? Journal of Banking and Finance.

  • Flannery, M., Hirtle, B., & Kovner, A. (2017). Evaluating the information in the Federal Reserve stress tests. Journal of Financial Intermediation, 29, 1–18.

    Article  Google Scholar 

  • Gick, W. and Pausch, T. (2012). Optimal Disclosure of Supervisory Information in the Banking Sector.

  • Goldstein, I., & Sapra, H. (2014). Should banks' stress test results be disclosed? An analysis of the costs and benefits. Foundations and Trends in Finance, 8(1), 1–54.

    Article  Google Scholar 

  • Lazzari, V., Vena, L., & Venegoni, A. (2017). Stress tests and asset quality reviews of banks: A policy announcement tool. Journal of Financial Stability, 32, 86–98.

    Article  Google Scholar 

  • Morgan, D., Peristiani, S., & Savino, V. (2014). The information value of the stress test. Journal of Money, Credit and Banking, 46(7), 1479–1500.

    Article  Google Scholar 

  • Neretina, E., Sahin, C., & de Haan, J. (2014). Banking stress test effects on returns and risks. In DNB working papers 419. Netherlands Central Bank: Research Department

    Google Scholar 

  • Nijskens, R., & Wagner, W. (2011). Credit risk transfer activities and systemic risk: How banks became less risky individually but posed greater risks to the financial system at the same time. Journal of Banking & Finance, 35(6), 1391–1398.

    Article  Google Scholar 

  • Petrella, G., & Resti, A. (2013). Supervisors as information producers: Do stress tests reduce bank opaqueness? Journal of Banking & Finance, 37(12), 5406–5420.

    Article  Google Scholar 

  • Sahin, C., & de Haan, J. (2016). Market reactions to the ECB’s comprehensive assessment. Economics Letters, 140(C), 1–5.

    Article  Google Scholar 

  • Shapiro, J. and Zheng, J. (2019). Stress Testing and Bank Lending (August 5, 2019).

Download references


The authors thank an anonymous referee and several participants in the 86th International Atlantic Economic Conference, held in October 2018, in New York, for useful comments.


UECE and CEsA are financially suported by FCT (Fundação para a Ciência e a Tecnologia), Portugal. This article was financially supported by FCT, under the projects UID/ECO/00436/2019 and UID/SOC/04521/2019..

Author information

Authors and Affiliations


Corresponding author

Correspondence to Maria Rosa Borges.

Additional information

Publisher’s Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Borges, M.R., Mendes, J.Z. & Pereira, A. The Value of Information: The Impact of European Union Bank Stress Tests on Stock Markets. Int Adv Econ Res 25, 429–444 (2019).

Download citation

  • Published:

  • Issue Date:

  • DOI:


JEL Classification