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Regulator communication and market confidence in difficult times: lessons from the great financial crisis

Gower, Paul; Meier, Florian; Shutes, Karl

Authors

Paul Gower

Florian Meier

Karl Shutes



Abstract

Communication with financial markets is an important task carried out by financial market supervisory bodies. In times of crisis, this can contribute to spreading confidence and calming markets. In light of the 10th anniversary of the last financial crisis, we examine the effect the UK Financial Services Authority (FSA), as the financial market regulator during that period, had on market confidence. Our aim is to derive lessons to aid the current supervisor in potential future crises. Analyzing the period 2006-2009, we find that both more positivity and uncertainty in tone in communications could either reduce or increase stock market volatility, depending on the type of communication and communicator. Further analysis also shows distinct impacts on short-term and long-term market volatility. The findings highlight the importance of considering source and type of communication when decisions on who communicates with the market are made. These results can be of use for any regulatory authority that communicates with financial markets to increase effectiveness of their messages.

Citation

Gower, P., Meier, F., & Shutes, K. (2019). Regulator communication and market confidence in difficult times: lessons from the great financial crisis. Eurasian Journal of Economics and Finance, 7(4), 1-24. https://doi.org/10.15604/ejef.2019.07.04.001

Journal Article Type Article
Acceptance Date Dec 17, 2019
Publication Date 2019
Deposit Date Jan 22, 2020
Journal Eurasian Journal of Economics and Finance
Publisher Eurasian Publications
Peer Reviewed Peer Reviewed
Volume 7
Issue 4
Pages 1-24
DOI https://doi.org/10.15604/ejef.2019.07.04.001
Keywords Market Communication; Market Confidence; Volatility; Financial Market Regulator; Text Analysis JEL Classifications: C88; G01; G10; G14; G18
Public URL https://uwe-repository.worktribe.com/output/5201218
Publisher URL https://eurasianpublications.com/Eurasian-Journal-of-Economics-and-Finance/Vol.7-No.4-2019/EJEF%20-%201.pdf

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