How do EBA stress tests affect financial stability? Evidence from media coverage

I assess the systemic effects of EBA stress tests, considering all exercises from 2009 to 2025. I document that EBA announcements linked to these exercises affect systemic metrics of risk, stress, and financial uncertainty, including outside the Euro Area. Using shocks extracted from the media coverage of stress test events in major European countries and the US, I show that the further dissemination and interpretation of information on such exercises by the media significantly amplify their systemic effects. Effects are heterogeneous across exercises and events but remain prevalent at the end of the time period, meaning these exercises still convey valuable information to the markets. Yet, while the system-wide dimension of exercises is continuously valued by market participants, not all exercises have proven effective in promoting financial stability and reducing information asymmetries.