Authors: Natalia Fischl-Lanzoni, Martin Hiti, Nathan Kaplan, and Asani Sarkar
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Staff Reports
Investor Attention to Bank Risk During the Spring 2023 Bank Run
Number 1095
April 2024 Revised March 2025
April 2024 Revised March 2025
JEL classification: G01, G12, G14, G21
We examine how investors’ perceptions of bank balance sheet risk evolved before and during the bank run in March-April 2023. To do so, we estimate the covariance (“beta”) of bank excess stock returns with returns on factors constructed from long-short portfolios sorted on shares of uninsured deposits and unrealized losses on securities. We find that investor perception of bank risk shifted, as the factor betas are insignificant before the bank run but become positive and significant during the run. In the crosssection, increases in the betas occurred for a limited set of banks and cannot be predicted by balance sheet risk in Q3 or Q4 of 2022. Instead, we find evidence that published bank news coordinated investor actions: they are informative to stock investors and significantly affect factor betas during the bank run, even three days after publication. In particular, for banks downgraded by rating agencies during the run, news arrivals increased (decreased) the share of factor betas that responded positively (negatively) to news. These results suggest that stock market investors have limited ability to discipline banks in a timely fashion during a bank run.
Author Disclosure Statement(s)
Natalia Fischl-Lanzoni
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Martin Hiti
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Nathan Kaplan
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Asani Sarkar
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Martin Hiti
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Nathan Kaplan
I declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Asani Sarkar
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Suggested Citation:
Fischl-Lanzoni, Natalia, Martin Hiti, Nathan Kaplan, and Asani Sarkar. 2024. “Investor Attention to Bank Risk During the Spring 2023 Bank Run.” Federal Reserve Bank of New York Staff Reports, no. 1095, March. https://doi.org/10.59576/sr.1095
Fischl-Lanzoni, Natalia, Martin Hiti, Nathan Kaplan, and Asani Sarkar. 2024. “Investor Attention to Bank Risk During the Spring 2023 Bank Run.” Federal Reserve Bank of New York Staff Reports, no. 1095, March. https://doi.org/10.59576/sr.1095
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