Investor Attention to Bank Risk During the Spring 2023 Bank Run

Fischl-Lanzoni, Natalia; Hiti, Martin; Kaplan, Nathan; Sarkar, Asani

doi:10.59576/sr.1095

Report

Investor Attention to Bank Risk During the Spring 2023 Bank Run

Abstract: We track investor perceptions of bank risk during the 2023 bank run using “balance sheet betas” — the covariance of a bank’s stock returns with returns on factors based on uninsured deposits and unrealized securities losses in 2022Q3. Betas are mostly zero before the run but rise significantly during it, and even further when a bank is in the news. These increases are only weakly related to bank fundamentals. Once the Fed’s liquidity support is announced, betas become insensitive to losses on eligible collateral. Public news and government interventions, rather than fundamentals alone, appear to coordinate shifts in information sensitivity.

JEL Classification: G01; G12; G14; G21;

https://doi.org/10.59576/sr.1095