Is There News in the Prime Rate?

Using intraday data, we find that bank announcements of changes in the prime rate have significant effects on Dow Jones stock price indexes and yields in the Treasury bill futures market. We find comparable effects using daily data for indexes of share prices of banks and financial firms as well as...

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Bibliographic Details
Published in:Journal of financial and quantitative analysis 1994-12, Vol.29 (4), p.633-646
Main Authors: Slovin, Myron B., Sushka, Marie E., Waller, Edward R.
Format: Article
Language:English
Subjects:
Bank loans
Bank markets
Bank rates
Banking industry
Banking regulation
Business structures
Coefficients
Debt
Futures market
Prime rate
Regression analysis
Stock market indices
Stock prices
Studies
Treasury bills
Yield
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Summary:Using intraday data, we find that bank announcements of changes in the prime rate have significant effects on Dow Jones stock price indexes and yields in the Treasury bill futures market. We find comparable effects using daily data for indexes of share prices of banks and financial firms as well as interest rates on various maturities of government securities. Our evidence is consistent with the view that banks have a comparative advantage in processing private information gained through bank-borrower relations and the regulatory supervision process.
ISSN:0022-1090
1756-6916
DOI:10.2307/2331113