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Is There News in the Prime Rate?

Published online by Cambridge University Press:  06 April 2009

Myron B. Slovin ,
Marie E. Sushka  and
Edward R. Waller
Myron B. Slovin
Affiliation:
College of Business Administration, Louisiana State University, Baton Rouge, LA 70803;
Marie E. Sushka
Affiliation:
College of Business, Arizona State University, Tempe, AZ 85287-3906
Edward R. Waller
Affiliation:
College of Business, University of Houston-Clear Lake, Houston, TX 77058
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Abstract

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.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 29 , Issue 4 , December 1994 , pp. 633 - 646
Copyright
Copyright © School of Business Administration, University of Washington 1994

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