Hostname: page-component-7dd5485656-2pp2p Total loading time: 0 Render date: 2025-10-30T10:48:17.709Z Has data issue: false hasContentIssue false
  • English
  • Français

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
Get access Rights & Permissions [Opens in a new window]

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.

Information

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

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Article purchase

Temporarily unavailable

References

Black, F. “Bank Funds Management in an Efficient Market.” Journal of Financial Economics, 2 (12 1975), 323–340.CrossRefGoogle Scholar
Boyd, J., and Prescott, E.. “Financial Intermediary Coalitions.” Journal of Economic Theory, 38 (04 1986), 211–221.CrossRefGoogle Scholar
Campbell, T. “Optimal Investment Financing Decisions and the Value of Confidentiality.” Journal of Financial and Quantitative Analysis, 14 (12 1979), 913–924.CrossRefGoogle Scholar
Cook, T., and Hahn, T.. “The Information Content of Discount Rate Announcements and Their Effects on Market Interest Rates.” Journal of Money, Credit, and Banking, 20 (05 1988), 167–180.CrossRefGoogle Scholar
Diamond, D. “Financial Intermediation and Delegated Monitoring.” Review of Economic Studies, 51 (07 1984), 393–414.CrossRefGoogle Scholar
Diamond, D. “Monitoring and Reputation: The Choice between Bank Loans and Directly Placed Debt.” Journal of Political Economy, 99 (08 1991), 689–721.CrossRefGoogle Scholar
Forbes, S., and Mayne, L.. “A Friction Model of the Prime.” Journal of Banking and Finance, 13 (03 1989), 127–135.CrossRefGoogle Scholar
Goldberg, M. “The Pricing of the Prime Rate.” Journal of Banking and Finance, 6 (06 1982), 277–296.CrossRefGoogle Scholar
Goldberg, M. “The Sensitivity of the Prime Rate to Money Market Conditions.” Journal of Financial Research, 1 (Winter 1984), 269–280.CrossRefGoogle Scholar
James, C. “Some Evidence on the Uniqueness of Bank Loans.” Journal of Financial Economics, 19 (12 1987), 217–235.CrossRefGoogle Scholar
James, C., and Wier, P.. “Borrowing Relationship, Intermediation, and the Cost of Issuing Public Securities.” Journal of Financial Economics, 28 (11 1990), 149–172.CrossRefGoogle Scholar
Lummer, S., and McConnell, J.. “Further Evidence on the Bank Lending Process and the Capital Market Response to Bank Loan Agreements.” Journal of Financial Economics, 25 (11 1989), 99–122.CrossRefGoogle Scholar
Pearce, D., and Roley, V.. “Stock Prices and Economic News.” Journal of Business, 58 (01 1985), 49–68.CrossRefGoogle Scholar
Prisman, E.; Slovin, M.; and Sushka, M.. “A General Theory of the Banking Firm under Conditions of Monopoly, Uncertainty, and Recourse.” Journal of Monetary Economics, 17 (03 1986), 293–304.CrossRefGoogle Scholar
Ramakrishnan, R., and Thakor, A.. “Information Reliability and a Theory of Financial Intermediation.” Review of Economic Studies, 51 (07 1984), 415–432.CrossRefGoogle Scholar
Sharpe, S. “Asymmetric Information, Bank Lending, and Implicit Contracts: A Stylized Model of Customer Relationships.” Journal of Finance, 44 (09 1990), 1069–1087.Google Scholar
Slovin, M.; Sushka, M.; and Hudson, C.. “Corporate Commercial Paper, Note Issuance Facilities, and Shareholder Wealth.” Journal of International Money and Finance, 7 (09 1988), 289–302.CrossRefGoogle Scholar
Slovin, M.; Sushka, M.; and Hudson, C.. “External Monitoring and its Effect on Seasoned Common Stock Issues.” Journal of Accounting and Economics, 12 (03 1990), 397–419.CrossRefGoogle Scholar
Slovin, M.; Sushka, M.; and Polonchek, J.. “The Value of Bank Durability: Borrowers as Bank Stakeholders.” Journal of Finance, 48 (03 1993), 247–266.CrossRefGoogle Scholar
Slovin, M., and Young, J.. “Bank Lending and Initial Public Offerings.” Journal of Banking and Finance, 14 (11 1990), 729–740.CrossRefGoogle Scholar
Smirlock, M., and Yawitz, J.. “Asset Returns, Discount Rate Changes, and Market Efficiency.” Journal of Finance, 60 (09 1985), 1141–1158.CrossRefGoogle Scholar
Waud, R. “Public Interpretation of Discount Rate Changes: Evidence on the Announcement Effect.” Econometrica, 38 (03 1970), 231–250.CrossRefGoogle Scholar