We propose a new approach to measuring the effect of unobservable private information orbeliefs on volatility. Using high-frequency intraday data, we estimate the volatility effect of awell identified shock on the volatility of the stock returns of large European banks as afunction of the...

[...]This paper aims to ascertain the quality (that is, thepredictive power and prediction errors) of two marketindicators: the distance to default and the subordinated debtspread. Previous work has established that banks’ marketprices reflect contemporaneous information about bank riskin the...