FSRC - Financial System Research Center

• Markets Look Beyond the Headline

  Staff Analytical Note 2018-37 Bruno Feunou, James Kyeong, Raisa Leiderman

  Many reports and analyses interpret the release of new economic data based on the headline surprise—for instance, total inflation, real GDP growth and the unemployment rate. However, we find that headline news alone cannot adequately explain the responses of market prices to new information. Rather, market prices react more strongly, on average, to non-headline news such as the composition of GDP growth, quality of jobs created and revisions to past data. Thus, tracking the impact of non-headline information released on the news day is crucial in analyzing how markets interpret and react to new economic data.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Asset pricing, Exchange rates, Interest rates JEL Code(s): E, E4, E43, G, G1, G12, G14

• Calibrating the Magnitude of the Countercyclical Capital Buffer Using Market-Based Stress Tests

  Staff Working Paper 2018-54 Maarten van Oordt

  How much capital do banks need as a buffer to absorb severe shocks? By using historical stock market data, market-based stress tests help estimate the magnitude of capital buffers necessary to absorb severe but plausible shocks.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): G, G1, G10, G2, G21, G28