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Stress Tests and Information Disclosure (2013)
| Citations: | 2 - 0 self |
BibTeX
@MISC{Goldstein13stresstests,
author = {Itay Goldstein and Yaron Leitner},
title = {Stress Tests and Information Disclosure},
year = {2013}
}
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Abstract
We study an optimal disclosure policy of a regulator who has information about banksability to overcome future liquidity shocks. We focus on the following trade-o¤: Disclosing some information may be necessary to prevent a market breakdown, but disclosing too much information destroys risk-sharing opportunities (Hirshleifer e¤ect). We nd that during normal times, no disclosure is optimal, but during bad times, partial disclosure is optimal. We characterize the optimal form of this partial disclosure. We also relate our results to the debate on the disclosure of stress test results. We thank Mitchell Berlin, as well as seminar participants at the Federal Reserve Bank of Philadelphia and at Wharton, for helpful comments. The views expressed in this paper are those of the authors and do not necessarily reect those of the Federal Reserve Bank of Philadelphia or of the Federal Reserve System. This paper is available free of charge at www.philadelphiafed.org/research-and-data/publications/working-papers/. 1 1
Keyphrases
information disclosure stress test partial disclosure federal reserve bank normal time seminar participant following trade-o stress test result org research-and-data publication working-papers bad time future liquidity shock helpful comment mitchell berlin federal reserve system market breakdown optimal form risk-sharing opportunity much information optimal disclosure policy
